Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19
Crude Oil Price Fails At Critical Fibonacci Level - 15th May 19
Strong Stock Market Rally Expected - 15th May 19
US China Trade Impasse Threatens US Lithium, Rare Earth Imports - 15th May 19
Gold Mind Reader's Guide to the Global Markets Galaxy: 'Surreal' - 15th May 19
Trade Wars and Other Black Swan Threats to Your Investments - 15th May 19
Our Long-Anticipated Gold Momentum Rally Begins - 15th May 19
Defense Spending Is Recession Proof - Defense Dividend Stocks - 15th May 19
US China Trade Issues Will Drive Market Trends – PART II - 14th May 19
The Exter Inverted Pyramid of Global Liquidity Credit risk, Liquidity and Gold - 14th May 19
Can You Afford To Ignore These Two Flawless Gold Slide Indicators? - 14th May 19
As cryptocurrency wallets become more popular, will cryptocurrencies replace traditional payments? - 14th May 19
How US Debt Will Reach $40 Trillion by 2025 - 14th May 19
Dangers Beyond a Trade War with China - 14th May 19
eBook - Greatest Tool for Trading? - 14th May 19
Classic Pitfalls for Inexperienced Traders - 14th May 19
Stock Market S&P 500 Negative Expectations Again - 13th May 19
Why Rising Living Standard in China Offers Global Hope - 13th May 19
Stock Market Anticipated Correction Starts On Cue! - 13th May 19
How Chinese Trade Issues Will Drive Stock Market Trends - 13th May 19
Amazon SCAM Deliveries for Fake Verified Purchaser Reviews "Brushing" - 13th May 19
Stock Market US China Trade War Panic - Video - 13th May 19
US Stock Market Leading Macro Economic Indicators Update - 12th May 19
SAMSUNG - BC94.L - Investing in AI Machine Intelligence Stocks - 11th May 19
US Increases Trade Tariffs Against China – Stock Markets, Gold, and Silver - 11th May 19
Who Has More To Lose In A No Deal Brexit? - 11th May 19
Gold at $1,344 Will Start Real Fireworks on the Upside - 11th May 19
Make America’s Economy Great Again - 10th May 19
Big US Stocks’ 2019 Fundamentals - 10th May 19
Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - 10th May 19
Stock Market Shake-Out Continues – Where Is The Bottom? - 10th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Gold Falls to Two-Month Low, But Demand Remains Solid

Commodities / Gold & Silver 2009 Jul 10, 2009 - 10:21 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD SLID yet again early Friday in London, recording the lowest AM Gold Fix since 8th May at $910 per ounce, and nearing Wednesday's two-month lows in the spot market at $905.


Down 2.5% down from last Friday's finish, the Dollar-price of Gold showed its worst weekly performance since the start of June ahead of today's Wall Street opening.

"In the near term, day-to-day moves continue to be influenced by the direction the Dollar takes," said one Shanghai analyst to Reuters this morning.

"In the longer term, inflationary expectations remain."

Japan however reported the fastest drop in wholesale prices since at least 1960 today, while US crude oil contracts dropped below $60 per barrel for the first time since mid-May, down 18% from the 2009 high hit just over a week ago.

The FTSE100 stock index here in London fell to its lowest level since late April. Tokyo's Nikkei ended the week down more than 5% from last Friday.

"Physical [Gold] demand remains depressed and it may take lower prices to prompt buying," says the July edition of Metal Matters from London market-makers Scotia Mocatta, pointing to a short-term technical target of $896 after the Dollar-price completed a head-and-shoulders pattern last month.

"However, the big picture outlook for Gold remains bullish...Competitive devaluation amongst numerous hard currencies will lead to further trouble for the financial markets. This is likely to keep interest in Gold running at a high level.

"As such, we would see any sell-off in Gold as a medium term buying opportunity."

On the currency markets today, the zero-yielding Japanese Yen pushed higher against all other major currencies, signaling "risk aversion" amongst Tokyo funds pulling cash home.

The Euro also fell against the US Dollar, but Gold Prices fell faster still, dropping to a 3-month low of €652.60 per ounce.

For UK investors now Ready to Buy  Gold, the price bounced off a fresh 6-month low of £557.60 overnight.

Sharply lower from the first quarter of 2009, daily volatility in the British Pound's effective exchange rate, the Sterling Index, remains twice the level of its two-decade average.

"Aggressive global monetary stimulus is reflationary, [it] has defused the tail risk of deflation, and has helped to lift commodity prices," reckon Richard Berner and David Greenlaw, the chief US and fixed-income economists at Morgan Stanley in New York.

Calling the ongoing drop in asset and consumer prices "disinflation" rather than deflation, "The near-term risk of lower underlying inflation gives the Fed latitude to maintain accommodation [i.e. zero rates and Quantitative Easing] for now," they go on.

But "unlike those who believe that low inflation and easy money will persist into 2011, we think that tighter monetary policy will be needed in 2010 to prevent inflation from rising too far too fast."

Over in India, meantime, the world's hungriest gold market, the federal government in Mumbai yesterday said it's issued 6,775 new licenses to jewelers to use its hall-marking centers and adding to a 20% increase for the year-to-April.

The Gold Hallmarking Scheme was launched in 2008 to encourage consumer confidence in bullion jewelry, obliging manufacturers to hit mandated standards of fineness.

Earlier this week, the Indian government also doubled import duties on Gold Bullion, despite a 50% drop in metal inflows from this time last year.

"Strong physical [Gold] demand is not likely to be triggered unless the metal breaks below the 900 level," says MKS Finance, a division of the Swiss refining group.

"Ironically, it is the marginal physical demand coming in above 900-905 that is preventing an aggressive selloff to penetrate that level."

Walter de Wet at Standard Bank meantime believes that "Buyers of gold in the physical market are now willing to pay a higher price for gold than a few months ago," pointing to strong physical flows in the wholesale market centered in London.

"We believe that sellers of scrap gold now require a much higher Gold Price to part with their gold than in February. Against the global economic backdrop, we view this as bullish for gold over the next six months. "

On the supply side of the market yesterday, South Africa reported a 10.5% drop in May's Gold Mining output from 12 months before.

"Gold Mining is a shrinking industry, it's been like that for almost a decade," says Dave Mohr, chief economist at Citadel Investment Services.

"We have run out of our high-grade gold deposits," he told AFP, adding that after dropping to second and then third place in world rankings behind China and the United States, South Africa is now likely to be overtaken by Australia.

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