Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19
Gold and Silver - The Two Horsemen - 11th Nov 19
Towards a Diverging BRIC Future - 11th Nov 19
Welcome to the Zombie-land Of Stock Market Investing - 11th Nov 19
Illiquidity & Gold And Silver In The End Game - 11th Nov 19
Key Things You Need to Know When Starting a Business - 11th Nov 19
Stock Market Cycles Peaking - 11th Nov 19
Avoid Emotional Investing in Cryptocurrency - 11th Nov 19
Australian Lithium Mines NOT Viable at Current Prices - 10th Nov 19
The 10 Highest Paying Jobs In Oil & Gas - 10th Nov 19
World's Major Gold Miners Target Copper Porphyries - 10th Nov 19
AMAZON NOVEMBER 2019 BARGAIN PRICES - WD My Book 8TB External Drive for £126 - 10th Nov 19
Gold & Silver to Head Dramatically Higher, Mirroring Palladium - 9th Nov 19
How Do YOU Know the Direction of a Market's Larger Trend? - 9th Nov 19
BEST Amazon SMART Scale To Aid Weight Loss for Christmas 2019 - 9th Nov 19
Why Every Investor Should Invest in Water - 8th Nov 19
Wait… Was That a Bullish Silver Reversal? - 8th Nov 19
Gold, Silver and Copper The 3 Metallic Amigos and the Macro Message - 8th Nov 19
Is China locking up Indonesian Nickel? - 8th Nov 19

Market Oracle FREE Newsletter

How To Buy Gold For $3 An Ounce

Gold Slips as Stock Markets Add to Wall Street Strength

Commodities / Gold & Silver 2009 May 27, 2009 - 08:42 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD ticked lower in Asia on Wednesday, holding below $950 an ounce in early London trade as world stock markets added to Wall Street's strong overnight close.

"Gold [on Tuesday] had all the makings of a beautiful technical reversal," writes Russell Browne at London market-maker Scotia Mocatta, "but the late bounce keeps the risk to the topside."


Pointing to support at $950 and then $934, he pegs resistance at $961 and then $966.

"I would be surprised if we don't reach a new high by the end of the year," said Chuck Jeannes, CEO of GoldCorp – the world's No.2 Gold Mining stock by value – at a conference yesterday.

"Markets move based on fear and expectation of what's going to happen, not when it actually does. [So] whether inflation appears in a year or six months or two years, we're focusing long term, and I do think it's going to dominate the trade in gold for a long time to come."

Consumer prices fell in Germany this month acording to regional surveys, but the European Union's €200bn fiscal stimulus is "starting to work" according to Commission president Jose Manuel Barroso.

"If we want to avoid a repeat of international imbalances," said European Central Bank policy-maker  Lorenzo Bini Smaghi  in a speech in Rome this morning, "it is necessary that countries with a systemic impact, such as China, adapt their monetary policy and allow their exchange rate to fluctuate to reflect competitiveness."

The US Dollar today held steady against most major world currencies, trading better than ¥95.25 and $1.3930 to the Euro.

But the British Pound jumped to fresh 7-month highs to the Dollar and 15-week highs vs. the Euro on news of a small rise in new UK mortgage approvals.

That pushed the Gold Price in Sterling down to its lowest level in 2009, dropping 1.3% to £591 an ounce.

"Importantly, in the medium term we don't expect a sharp rebound in overall economic activity," warned Marius Kloppers, head of global minerals and energy giant BHP Billiton yesterday.

"In fact, we probably believe that economic recovery will be both slow and protracted."

Guessing that recent base-metal hoarding by China was due to Beijing's $587 billion fiscal stimulus – rather than improved economic demand – "There may have been some over-buying in anticipation of the stimulus package, which may have led to some stock-build ahead of real demand," Kloppers told a mining conference.

For the Opec oil cartel, in contrast, "There is no need to cut production," claimed Saudi oil minister Ali al-Naimi in Vienna today, forecasting a return to $75 per barrel by the end of this year.

"The reason we don't want to [cut output] now is that supply and demand is so out of balance. Making another cut now would not help stabilize the market."

The Dubai stock market rose to a 5-month high this morning as US crude oil futures broke back above $60 per barrel.

The Baltic Dry Freight Index – a measure of bulk shipping costs and thus world trade – "has continued to rally over recent weeks," notes Leon Westgate at Standard Bank today, "reaching the highest level since early October and nearly 4.5 times above the lows of early December.

"The index still has a very long way to go in order to reach the peak seen this time last year. However, the continued recovery [is] a positive sign in terms of continuing Chinese demand for bulk commodities and by inference, industrial metals generally."

Last year's two-thirds collapse in base metals prices meant that mining-stock corporate activity "slowed markedly" between Jan. and March according to Price Waterhouse Coopers' latest report on global M&A.

Only 18 deals were completed or pending, with a potential value of $12bn.

The first quarter of 2008 saw 142 deals worth $78.6bn – itself a 75% drop from 2007.

"The decline in deal activity for the metals  does not come as a surprise," says Jim Forbes, leader of PwC's mining team.

"With strategic buyers' general aversion to risk, as well as tight credit and weak commodity prices, we are likely to continue seeing acquisitions of minority stakes as the preferred deal type throughout 2009."

New data yesterday showed South Africa – formerly the world's No.1 Gold Mining nation – slipping into recession for the first time since 1992 at the start of this year, with GDP falling 6.4%.

Already halving from the peak of 10 years ago, South Africa's gold output fell 10% from the fourth quarter of 2008.

Gold Mining output from world No.5 Russia, in contrast, rose 39% during the first four months of this year, according to the domestic mining lobby.

Shandong Province in China – the most productive region of the world's No.1 gold producer – is now planning to raise its output 12% by 2011, reports the People's Daily Online today.

"Traditionally, central banks held their reserves in gold rather than other countries' government bonds," writes Martin Hutchinson at Prudent Bear. For the major central bank pools of money – such as Japan, China, Taiwan and the Middle East – we are likely to go back to that."

Last month the Chinese central bank reported 75% growth in its Gold Bullion reserves from 2004, pushing it into fifth place in the league table up at 1,045 tonnes.

"They will diversify a bit from gold," reckons Hutchinson, "possibly to silver [and] also to non-traditional commodity stores of value such as grain, copper, other metals and especially oil. [But] this change in central bank investment policy will...cause an enormous bull market in gold, whose annual production is worth only about $100 billion at current prices, a pittance in relation to the weight of money heading its way.

"A Gold Price of $5,000 per ounce is well within reach."

By Adrian Ash
BullionVault.com

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 www.BullionVault.com , 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 http://www.MarketOracle.co.uk - 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