Gold
Gold finished trading in New York yesterday at $963.40, up $7.00 and silver was up 25 cents to $18.37. Gold traded sideways to slightly up in Asia before rising in early European trading by nearly 1%.
Gold remained firm and the dollar was under steady selling pressure for much of the day yesterday and remained so overnight as markets reacted to a bounce in oil prices and a raft of dismal earnings reports from a number of leading U.S. companies including American Express (significant rise in consumers defaulting on loans), Apple (gloomy outlook for Q3) and Texas Instruments. U.S. growth will slow in the second half of the year as unemployment rises and stock-market declines erode household wealth, according to an index of leading economic indicators.
With oil and the dollar essentially flat, gold seems to be reacting to the renewed weakness in international stock markets – Asian stock markets were mixed overnight and most European stock markets have again fallen sharply this morning.
Risk aversion will remain paramount in the coming weeks and this bodes very well for gold – especially with inflation and stagflation stalking the global economy.
Silver and palladium are up by more than 1% this morning and platinum is up by 2% after recent sharp falls.
Gold Analysts Revise Up Gold Price Forecasts
Even those who were bearish very recently and incorrectly called for gold to fall below $850 (some even predicted gold falling to $700) have turned from being bearish to being bullish and many have been revising their forecasts upwards. Many are now calling for gold above $1,200 before year end.
John Reade, analyst at UBS Ltd., said in a report yesterday that, “If gold moves from being a minority-held asset class to a popular safe-haven then our short-term forecasts of $1,000 an ounce in one month and $1,050 in three months will look very conservative.”
Recently, Citigroup also revised up its forecasts. Mining and metals analyst John Hill said the mix of macro and supply/demand factors, along with the same forces that have pushed gold higher for the last five years, give him good reason to remain bullish on gold. He sees prices climbing through 2009 and 2010. “Longer term, we would not be surprised to see gold double from current levels as the global policy prescriptions for the credit crunch remain powerfully and uniformly re-flationary,” the analyst told clients.
Gold’s Performance as a Safe Haven Asset
An example of gold’s historic role as a safe haven asset is seen in the following data. The industry performance of Physical Gold Versus the S&P 500 during eleven stock market declines of 15% or more in the Post-War period (since 1946).
Today’s Data and Influences
Stock markets and breaking financial news seems likely to be the primary driver of currency and precious metal markets today.
Gold and Silver
Gold is trading at $973.20/973.80 per ounce (1100 GMT).
Silver is trading at $18.60/18.65 per ounce (1100 GMT).
PGMs
Platinum is trading at $1869/1879 per ounce (1100 GMT).
Palladium is trading at $416/420 per ounce (1100 GMT).
