Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold and US Stock Mid Term Election and Decade Cycles - 19th July 19
Precious Metals Big Picture, as Silver Gets on its Horse - 19th July 19
This Technology Everyone Laughed Off Is Quietly Changing the World - 19th July 19
Green Tech Stocks To Watch - 19th July 19
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold Hits Short Term High as Global Recession Sparks Risk Aversion

Economics / Gold & Silver 2009 Apr 23, 2009 - 08:11 AM GMT

By: Adrian_Ash


THE PRICE OF PHYSICAL gold held above a one-week high early Thursday in London, recording its best Gold Fix in seven sessions at $894 an ounce as European stock markets flipped in and out of the red.

"It is risk aversion that is fuelling gold's rally," said one commodity analyst to India's Economic Times today.

"The bias is on the upside," agrees Kunal Shah at Nirmal Bang Commodities, also in Mumbai, "as economic uncertainties are creeping up giving rise to risk aversion."

Yesterday the International Monetary Fund (IMF) confirmed its prediction of the worst global downturn since the 1930s, slashing its January forecast of 0.5% growth to a 1.3% contraction for 2009.

Today the Gold Price for Indian investors – the world's hungriest buyers of physical metal – ended unchanged at 14,413 Rupees on the MCX June contract.

British, Swiss and Canadian investors now Ready to Buy Gold saw the price tick back from fresh 3-week highs.

Of 182 economies tracked by the IMF, some 72 are now expected to shrink this year, including 30 of the world's 34 most developed nations.

"By any measure," the IMF warns in its twice-annual World Economic Outlook, "this downturn represents by far the deepest global recession since the Great Depression."

During the financial crisis to date, "Gold has been one of the few assets that has genuinely provided investors with diversification," notes Natalie Dempster in her latest analysis for promotional-group the World Gold Council (WGC).

"There is no intrinsic reason why gold should perform badly during periods of deflation, like equities for example, which typically suffer profoundly as the earnings outlook collapses and/or the real debt burden of companies grows.

"Traditional assets like equities and bonds are a poor hedge against inflation," says Dempster, pointing to the sharp risk that "when banks start to lend again and consumers start to spend, inflation will accelerate.

"By contrast, gold, and commodities in general, often perform at their best."

In each of the nine years since 1971 when US consumer-price inflation has exceeded 5% year-on-year, the Gold Price averaged 31% annual gains on the WGC's analysis.

"Commodities rose by 9% and bonds and equities were essentially unchanged."

For now, however, "[Gold Trading] volumes remain low and investment interest little," says Walter de Wet in today's note from Standard Bank here in London.

"A break above $905 is needed before the market could become bullish on the metal."

"The gold market still seems to be lacking momentum to push beyond the $900 mark," agrees Pradeep Unni at Richcomm DMCC in Dubai, "weighed down by stalling investment in the world’s largest gold-backed exchange-traded fund."

With the world's strongest jewelry markets becoming Net Exporters of Gold for the first time since the 1930s so far in 2009, the first three months of this year witnessed fresh record inflows to Gold ETF investment funds.

Western investors added a record 469 tonnes of gold to the ETFs' total hoard, says GFMS data, squashing the previous quarterly record of 145 tonnes and taking the total value of gold held by the largest funds to $48.6 billion.

Global stock-markets, for comparison, ended Jan. '09 worth $31 trillion according to the World Federation of Exchanges (WFE).

Gold ETF growth has since stalled, with New York's SPDR – which holds Gold Bullion in trust for shareholders paying 0.4% per year in fees – sticking at 1,106 tonnes since Thursday last week and standing unchanged from this time a month ago.

Retail-investment demand for gold also appears to be easing from the recent records, says Wolfgang Wrzesniok-Rossbach at German refining group Heraeus.

Following the dramatic bar and Gold Coin Shortage of 2008, which has forced retail premiums on even the most-heavily minted coins to 10% and above, "From next week onwards, all the larger bars (1-ounce upwards) and a little later even the smaller, minted ones should be available again for prompt delivery," he writes in his Precious Metals Weekly today.

By Adrian Ash

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2009

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules