Gold The continued pressure of a strong dollar saw gold fall yesterday as it technically broke through the trend-line of $934. Despite equity weakness, gold remains heavy. A move lower in the short term would seem likely. However, with the gold/silver ratio of 68.7, a 1st quarter low, this downward trend may soon be capped and a bounce back to all time highs in July may be possible. It has gained slightly this morning and is currently trading at $920.34. Due to this price breakdown, gold ETFs saw net inflows for the first time in 3 months.
Gold Gold steadied on Friday as the dollar index reversed earlier losses but it is still taking its direction from the currency markets. The dollar remains in a very tight range ahead of a Federal Reserve meeting next week. Furthermore, the lack of any sell-off in gold in the wake of the latest IMF gold sale would indicate that the effect of these sales is already factored into the price.
Gold: The long term trend line price of gold at $925, which has been steady since Monday, pushed higher today based on news that the World Bank has raised its growth forecast for China. The Chinese stock market rallied as did commodities across the board. Another main factor behind the return of bullish sentiment for gold is the euro. In contrast to the US Treasury, the ECB has stated that it does not intend to cut interest rates further which has pushed the euro to 1.39444 and gold is holding firm.
Gold: Yesterday's comments by Russian President Dmitry Medvedev at the BRIC summit, calling upon the International Monetary Fund (IMF) to expand the currency basket of Special Drawing Rights to include the Chinese yuan, commodity currencies and gold in order that it matures into a reserve currency, is positive for gold as it shows how gold is again being viewed as an important monetary asset. Gold is currently trading at $930.40/€672 and £571. Silver:
Gold: Gold's correction has been quite sharp but given the extent of the rise since mid April (from $864/oz to over $980/oz or over 13% in just 6 weeks) it is not unexpected. A 50% retracement of sharp rallies is quite common and yesterday's lows of $925/oz is very close to an exact 50% retracement.
Gold rallied strongly yesterday to a high of $955, taking out the $945 resistance level in the process. Overhead resistance now stands at $967. The US dollar weakened significantly against all the major currencies as the negative sentiment towards sovereign credit shifted from the UK to the US in the wake of the S&P report yesterday. S&P have put the UK on negative watch from a credit ratings perspective. The expectation that the US could possibly lose its AAA credit rating, triggered a sell-off in US bonds and the dollar simultaneously.
Recent intense deflationary pressure had taken the shine off gold but with the dollar sliding yesterday, inflation came back to the fore causing gold to rise by more than 1.2%. This morning the metal was over $943, the highest in 8 weeks. This is a strong signal and it could be time for the resistance levels to be tested. If $946 is breached, the next level to look for would be $967. Silver was a little more sluggish than gold with only a 0.5% gain. It touched $14.40 this morning before moving back to $14.30. This could signal a correction, as $14.40 represents a double top.
Gold Bullion Unique as No Counterparty Risk Gold is unique among asset classes as it is the only asset class not dependent on the performance of auditors, management, corporations, financial institutions, banks, politicians and governments. Nor should physical gold be dependent on the performance of trustees, custodians and or sub custodians. Gold does not depend on the performance and health of the wider economy and as importantly when you buy gold in its physical form there is no third party liability or credit risk. Or at least there should not be. Gold has an intrinsic value in and of itself that is not contingent on someone else’s or some entities performance or mere promise to pay. Thus, gold in its physical form is still the ultimate form of financial insurance. This is why every major central bank in the world still maintains a significant portion of their reserves in gold bullion and many, such as the Chinese, are now increasing their gold bullion reserves.
Gold demand soared 38% to 1015.5 tonnes in the first quarter of 2009 according to The World Gold Council’s “Gold Demand Trends” report. A combination of factors including diversification, safe haven buying and inflation hedge demand are attributed with the upsurge. However, George Milling-Stanley, the Managing Director of the WGC also cites the global shift in sentiment from “capital appreciation to wealth preservation.” Rumours that the Russian Central Bank may allow Russian banks to pledge gold as collateral are also circulating the market.
Global markets perceive that economic green-shoots may be growing on stony ground as the rally in the Dow ran out of steam last week. Inflation figures published in the US suggested that core inflation may be higher than previously expected, contributed to the down week for the Dow and a minor strengthening of the Greenback. Despite the dollar strengthening, gold benefited from the outflows from both stocks and commodities.
The Horse Race
Further consolidation was seen yesterday with gold and silver rising marginally again and both look set to have a second strong week of gains. While the staggering pace of economic decline has certainly abated, individual economies and the global economy continues to deteriorate as recessions deepen internationally.
Rep. Alan Grayson talks to the Federal Reserve Inspector General Elizabeth Coleman of the Federal Reserve, asking her questions regarding trillions of dollars that came from the Fed's expanded balance sheet and what the losses on its $2 trillion portfolio are. The Inspector General does not have the answers Grayson is looking for.
Gold and silver were essentially flat yesterday and consolidated on recent gains despite a slight dollar recovery and marked weakness in equity markets. Gold has fallen somewhat in Asian and early European trading but still looks good from a technical perspective.
Gold and silver rose again yesterday (1.2% and 2.3% respectively) as the dollar continues to come under pressure. The dollar has fallen not due to an increase in risk appetite but rather an increase in risk aversion coming from the dawning realisation that the very credit worthiness of the US is at risk due to the global financial and economic crisis. The former US Comptroller General, David Walker, warned in an op-ed article in the Financial Times that “America’s Triple A Rating is at Risk”.
Gold and silver took a breather from their gains of last week and consolidated yesterday with marginal losses for both metals. The dollar recovered somewhat from its sharp falls of last week as did long term US interest rates (10-Year: 3.180% -0.113) but US stock markets came under pressure. Gold threaded water in Asia but has risen sharply in early trading in Europe as the dollar has again come under pressure with the US Dollar Index falling to 82.40.
Gold and silver prices rose last week (gold was up 3.1% and silver rose sharply by 11.6%) as the US dollar fell sharply and broke down technically and US bonds continue to sell off aggressively. Stock markets remained sanguine as ever and continued on their merry way despite valuations looking very ripe and the recent bear market rally looking long in the tooth. Ostensibly the data was positive last week leading to more “green shoots” speculation but the jobs data was actually poor (previous months jobs number was revised upwards - March Nonfarm Payrolls revised to (699K) vs.
Gold rose for the fourth day yesterday and is up some 3.5% so far this week and set to complete a very strong week. As expected, under reported and leveraged silver has outperformed gold and surged more than 12% this week. A close above $14.60/oz, could see silver again challenge recent nominal highs at $20.88/oz. Gold’s rise in recent days has been volatile with sharp moves up followed by retrenchments and this is leading to an under appreciation of gold’s move up and a perception that gold is struggling. Some of the larger shorts appear to be engaged in a form of managed retreat.
Gold rallied 2% following news that China’s state holdings of the metal have been quietly raised by 76% since 2003. Rumours and speculation about Chinese buying have been rife for years, but many market participants remained in denial until this irrefutable proof was given. China is not only the world’s largest mine producer of gold, but also the fifth-largest individual country holder of gold with 1,054t.