Gold Has Marginal Falls on Low Volume Trading and Profit Taking

Gold

Gold fell to $1,220/oz per ounce in early European trade before bouncing. It is now trading at $1,223/oz and has thus given up some of yesterday’s small gains as summer trading volumes remain low and traders book profits after the recent rise in gold prices. Investors remain risk averse as seen in weakness in equity markets and the safe haven bid for German bunds, Japanese yen and US Treasurys (despite the dollar coming under selling pressure).

Gold was due a correction after its rise from below $1,160/oz to over $1,227/oz since July 27th which was a 6% gain in just 3 weeks. With trading volumes lackluster during this holiday period, some traders may decide to book profits.

However, safe haven demand for physical remains robust despite having declined somewhat from the higher levels seen some weeks ago. While investment demand has risen sharply from the meager levels seen in the 1990s and early 2000s, investment demand remains small vis-à-vis allocations to other asset classes such as equities, bonds, derivatives and hedge funds. The sharp increase in investor demand is sustainable as it comes from a very low base. Also, investment demand is broad based and is coming from speculators looking to make a return, from investors internationally (retail and HNW) diversifying portfolios and using gold as financial insurance and for wealth preservation purposes. Not to mention central bank demand due to concerns about sovereign defaults and the debasement of fiat currencies and attendant monetary risk.

These trends look to be long term in nature and unlikely to dissipate any time soon and should see gold again challenge its nominal high (in dollars) of $1,265/oz in June. Especially as it has now had another period of correction and consolidation which should result in rising prices in the traditionally stronger autumn months.

Gold is currently trading at $1,222.43/oz, €949.76/oz and £781.50/oz.

Silver

Silver is currently trading at $11.76/oz, €14.29/oz and £11.76/oz.

Platinum Group Metals

Platinum is trading at $1,533.50/oz, palladium is at $486/oz and rhodium is at $2,100/oz.Gold Has Marginal Falls on Low Volume Trading and Profit Taking

Mark OByrne

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