Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20
Facebook (FB) AI Mega-trend Tech Stocks Investing 2020 - 10th Feb 20
The US Constitution IS the Crisis - 10th Feb 20
Stock Market Correction Continues - 10th Feb 20
Useful Tips for Becoming a Better Man - 10th Feb 20
Will CoronaVirus Pandemic Trigger a Stocks Bear Market 2020? Part1 - 9th Feb 20
Could Silver Break-out like it did in 2011? - 9th Feb 20
The End of the Global Economy - 9th Feb 20
Fed to Stimulate in Any Crisis; Don’t Let Short-Term Events Bother You - 9th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Deflation Hits Gold Despite Central Bank Money Printing

Commodities / Gold & Silver 2009 Jun 30, 2009 - 08:29 AM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleTHE PRICE OF GOLD eased back from a 3-session high of $945 an ounce early in London on Tuesday, dropping back as European stock markets dipped and government bond prices ticked lower worldwide.


Only short-dated German Bunds rose, buoyed by bad economic news and pushing 1-year yields down to 0.81% ahead of Thursday's interest-rate decision from the European Central Bank (ECB).

Crude oil also slipped back, down from Monday's new 8-month highs above $73 per barrel.

"The recovery in commodity prices during the first half of this year has caught much of the market by surprise," writes Leon Westgate in today's Commodities Daily from Standard Bank.

Since New Year's Day, Westgate notes, copper and lead gained 58% and 57% respectively, while US crude oil contracts added 53%.

"We continue to see small-scale physical gold buying whenever gold dips towards $935," adds his colleague at Standard Bank Walter de Wet.

"This is providing good support [but] quarter-end window-dressing and a lack of momentum combine into our preferred [short-term] strategy to sell  into gold rallies."

"[Summer] languor appears to have set into the gold market," agrees John Reade at UBS, also in London. But Canada's National Post today notes that gold "has a period of seasonal strength from July 12 to Oct. 9," according to Brooke Thackray's 2009 Investor's Guide: How to Profit from Seasonal Market Trends.

"The trade has been profitable in 18 of the past 24 periods."

For UK investors, the Gold Price has dipped in twenty out of the last 39 summers before rising in autumn and winter to end the year higher.

Thirteen of these "summer sales" came during long-term bull runs, such as gold buyers enjoyed during the  1970s' inflation and again this decade.

"The probability of a real Sterling crisis is [now] around one in three, and the probability of major tax hikes and cuts in public spending is roughly one in one," says Harvard professor and British finance historian Niall Ferguson in an interview with Bloomberg.

"Our public finances are easily the worst we've ever had in peacetime," adds Margaret Thatcher's former finance minister Nigel Lawson.

"The amount of borrowing the government will have to do as a result of the deficit is very worrying."

New data today showed the British economy shrinking at its fastest pace on record, down 4.9% year-on-year to the end of March.

Business investment shrank by almost one-tenth. The UK's trade deficit held at £34 billion annualized ($56bn) despite a drop in the Pound's trade-weighted value worse than both the IMF bail-out of 1976 and the abandonment of gold in 1931.

Sterling retreated 1.5¢ on the news, down from a new 8-month high of $1.6740 to push the Gold Price in British Pounds 1% higher from a 4-session low at £562.

New German data meantime showed unemployment rising for the seventh month running to 8.3%, while across the 16-nation Eurozone, consumer prices fell year-on-year for the first time since current records began 12 years ago.

"With a more timid policy response than elsewhere," said Daniele Antonucci at Capital Economics to Dow Jones, "the risk is that the Eurozone might ultimately enter a more prolonged and damaging period of deflation."

Last week saw the European Central Bank (ECB) lend €442 billion ($620bn) to Eurozone banks at just 1% interest. But growth in the Eurozone money supply still fell in May, the official statistics agency said this morning.

Dropping to a 12-year low of 3.7% annually, growth in the broad M3 measure was just half its average of the last three decades. It fell below the ECB's initial target of 4.5% per year – set when the Euro became legal tender in 2000 – for the first time since 2001.

Eurozone investors now Ready to Buy  Gold saw the price unmoved at €666 an ounce by lunchtime Tuesday in Frankfurt, more than 140% above its level when the single currency was introduced.

Today's M3 data showed annual growth in new lending to Eurozone governments rising to 8.3%, up from 8.0% in April.

"History suggests that deflation is highly unlikely to persist in the long run," says the Intelligent Investor column at the Wall Street Journal, noting that the Great Depression only saw prices fall from 1930 to 1932.

"With Uncle Sam now on a borrowing binge," it adds, "we could easily end up with too much money chasing too few goods – the very definition of inflation."

The WSJ's Intelligent Investor recommends buying inflation-linked Treasury bonds (TIPS) for protection. It does not mention gold.

"[Policy-makers] have a tendency to be late, tightening financial conditions slowly for fear of doing it prematurely or too severely," says the Bank for International Settlements in its latest annual report, warning that acting too slowly may spark severe inflation.

"Because their current expansionary actions were prompted by a nearly catastrophic crisis, central bankers' fears of reversing too quickly are likely to be particularly intense, increasing the risk that they will tighten too late."

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