Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
UK EU Election Results, Brexit Party Victory, Labour and Tory Bloodbath, UKIP and ChangeUK Die - 27th May 19
The Three M's of Hyperinflation : Milosevic, Mugabe, And Maduro - 26th May 19
Global Multi-Market / Asset Charts Review - 26th May 19
An Oil Shock Could Be the Black Swan That Finally Drives Gold Higher - 26th May 19
Brexit Party Forces Theresa May to Resign, Boris Johnson Next Tory Prime Minister? - 26th May 19
IBM - Investing in AI Machine Intelligence Stocks - 25th May 19
Seasonal Dysfunction: Why Generations of Gold and Silver Investors Are Having Such Difficulty - 25th May 19
Employment - The Good and the Bad of Job Automation - 25th May 19
Gold Mining Mid-Tier Stocks Fundamentals - 25th May 19
Buy This Pick-and-Shovel 5G Stock Before It Takes Off - 25th May 19
China Hang Seng Stocks Index Collapses and Commodities - 24th May 19
Costco Corp. (COST): Finding Opportunity in Five Minutes or Less - 24th May 19
How Free Bets Have Impacted the Online Casino Industry - 24th May 19
This Ultimate Formula Will Help You Avoid Dividend Cutting Stocks - 24th May 19
Benefits of a Lottery Online Account - 24th May 19
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
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

Market Oracle FREE Newsletter

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

Gold Pushes Over $1,000 as Weekend Nears

Commodities / Gold & Silver 2009 Sep 11, 2009 - 07:04 AM GMT

By: Adrian_Ash

Commodities

THE SPOT PRICE of gold rose back above $1,000 an ounce as the start of US dealing approached on Friday, as European equities added to this week's gains and crude oil held above $71 per barrel.

The Dollar bounced from new 2009 lows on the currency market, helping gold priced in Euros climb back above €685.



By lunchtime in London, the UK's FTSE100 index stood 3.5% higher for the week, but government bond prices also rose, pushing the yield offered by 10-year US Treasuries down to 3.65%.

New data showed US import prices jumping 2.0% in August from July.

"Gold has held up surprisingly well, finishing close to its start for the last two days," says MKS Finance, a division of the Swiss refining group, in a note.

Heading towards the weekend 0.7% higher for Dollar investors from last Friday's finish, the gold price averaged across both the last 30 and 90 days has hit new record highs this week, moving above the previous peaks of April '08 and June '09 respectively.

"It remains to be seen how the yellow metal will react to physical selling," cautions MKS, "with scrap sales always a few days lagging after a sharp rise. As the US Dollar loses ground to the major currencies, gold ought to be subject to a correction before possibly trying higher."

"Ordinarily, we don't pay too much attention to the Dollar's ups and downs," says an editorial in Los Angeles' Investor's Business Daily. "Neither do we closely watch gold. [But] since the advent of the new US administration last November, the trade-weighted Dollar has fallen 7%, while gold in recent days has risen above $1,000 an ounce...sending a clear message:

"Investors are worried about what they see in the United States."

"US Dollar – the new carry currency?" asks Neil Hume at the FT's Alpha blog today, after the 3-month interbank lending rate for US Dollars fell to a record low of 0.299% on Thursday, "leaving it some way below the Yen and the Swiss Franc."

Those "traditional funding currencies...are not weakening," notes Steven Barrow at Standard Bank, even though "high yield/high risk currencies have rallied for most of this year in what seems to be a return to the carry trade" in which speculators borrow in a low-cost currency and sell it for higher-rate money, pocketing the interest-rate differential as easy money.

Begun when Tokyo interest rates fell to zero a decade ago – and put at $1 trillion by The Economist in early 2007 – the Yen carry trade knocked 40% off the Japanese currency's international value as traders repeatedly sold it on the forex market.

The strategy blew up however when the banking crisis hit two years ago, forcing Yen-debtors to buy back the money they'd borrowed at ever-higher prices. Inside 18 months, this pushed the Japanese currency 108% higher vs. the British Pound and 121% higher against the New Zealand Dollar.

"It's notoriously hard to find real data to determine the size of carry trades funded out of any currency," says Barrow, "let alone the US Dollar. Nonetheless, we feel it advisable to assume that this funding switch [from Yen to Dollars] is happening to some extent."

On the data front early Friday, Japan revised its second-quarter GDP figures down to 0.6% growth from the initial 0.9% estimate.

Both the UK and Germany reported a sharp rise in factory input prices for August, up 2.2% and 0.7% respectively from July.

Over in the usually hungry Indian gold market meantime, prices breached new record highs above 15,900 Rupees per 10 grams. "Looking at the current scenario, prices are likely to rise to the 16,500 level in the coming weeks," reckons one dealer in Zaveri Bazaar, potentially denting the post-harvest festival buying set to peak with Diwali in mid-October.

Fourth-quarter Indian gold buying is typically three times larger than over the preceding three months according to analysis by Standard Bank's commodity team, and "The seasonal pattern should remain," they believe, "irrespective of the actual level of demand."

Should Indian gold prices continue to rise, however, "More and more people will start selling," says Harmesh Arora, vice-president of the Bombay Bullion Association, speaking to Dow Jones.

"Some re-stocking of imported gold is happening, but retail sales are dismal," says one Mumbai dealer.

"Many of the jewelers have been offering discounts of 50-80 Rupees per 10 grams [0.5%] to bring in customers," the newswire quotes another Mumbai dealer.

Meantime in China – destination for 31% of all the physical gold sold worldwide between Jan. and July – the National Statistics Bureau said today that industrial production rose 12.3% in August from a year before. Retail sales jumped 15.4% year-on-year.

"Industrial activity should continue to grow in the coming months, underpinned by resilient domestic demand and a rebound in exports," reckons J.P.Morgan's local equities chief.

Saving a massive 23% of China's gross domestic product last year, private households have almost doubled their gold purchases as a proportion of savings since 1998, taking it to more than 1.8% last year and spending a record $5.7 billion on jewelry and physical gold investment in the first half of 2009.

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