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
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 Dips Back to $1,000

Commodities / Gold & Silver 2009 Sep 21, 2009 - 09:48 AM GMT

By: Adrian_Ash


Best Financial Markets Analysis ArticleU.S. DOLLAR GOLD PRICES slipped further from last week's 18-month high at $1,024 an ounce early Monday, briefly dropping south of $1,000 as world stock markets also fell, losing almost 1% on average.

Crude oil sank to a one-week low near $70 per barrel, while the US Dollar bounced almost a cent against the Euro from last Thursday's 12-month lows.

Government bonds were little changed ahead of Wednesday's policy decision from the US Federal Reserve.

"We maintain that gold should be bought on dips," says Walter de Wet, senior commodities analyst at Standard Bank here in London.

"Precious metals have been finding strong resistance to a move higher. But we believe the large amounts of liquidity provided by central banks can only serve as good support to precious metals on the downside."

"The big picture remains bullish," agrees London market-maker Scotia Mocatta in a client note, "and although a downside correction in the wider markets might still drag gold prices lower as investors move into cash, the secondary reaction might be for investors to store their cash in bullion.

"The Dollar and other currencies could well suffer if the markets enter another period of turbulence."

Today the US Dollar jumped on the currency markets as risk assets dropped, helping support the gold price in Euros above €680 an ounce.

UK investors and savers now looking to buy gold saw the price unchanged from Friday's finish above £619 an ounce.

"Sterling and the Dollar are both the victims of quantitative easing," writes Steven Barrow, chief currency strategist at Standard Bank, in his market note today.

"The Pound has been insulated from this a bit because it has been able to rally at the expense of the universally weak Dollar this year. But clearly on a cross basis, the Pound has suffered and it does not look as if this suffering is over."

Today the Pound fell to a five-month low vs. the Euro, even as the single European currency slipped vs. the Dollar.

"[New IMF gold sales] will put the financing of the IMF on a sound long-term footing, and enable us to step up much-needed concessional lending to the poorest countries," said International Monetary Fund managing director Dominique Strauss-Kahn late Friday, vowing to conduct the sales "in a responsible and transparent manner that avoids disruption of the gold market."

The last IMF gold-sales program, conducted between 1976 and 1980, saw it sell one-third of its holdings, while the price of gold rose eight times over.

Now the IMF says it will offer gold directly to central banks, but only ever at market prices, rather than a discount. Alternatively, it may conduct sales onto the open market, capping its sales within the new Central Bank Gold Agreement due to commence next weekend.

The IMF is not a signatory to the CBGA, but the new five-year agreement – the third since 1999 – limits total sales by Europe's central banks to 400 tonnes annually.

Sales during the current CBGA year, starting Sept. 2008, have undershot that level by almost two-thirds. Central banks worldwide thus turned net buyers of gold for the first time in 20 years during the first-half of 2009 according to the GFMS consultancy.

Data from the Russian central bank today said it added 9.4 tonnes to its hoard – now the world's 11th largest official stockpile – in August.

Over in the retail market in contrast, "Right now we are seeing a sharp increase in people selling gold coins to us," said Pat Heller of Liberty Coin Service in Lansing, Michigan, to the Numismaster website late last week.

"We have had some people buying from us, but we haven't seen any particular increase."

Gold dealer Julian Jarvis of Greencastle, Indiana, agrees there's no buying pressure on the coin market right now, telling Numismaster that dealer mark-ups on gold coins are "the cheapest they've been for two years."

Jarvis is charging 5% mark-ups, whereas last autumn's rush to buy gold from small dealers and online coin shops saw premiums reach 10% on average, with widespread reports of shortages after anxious savers emptied dealer inventories from Germany to Canada and California. (See how Lehman's collapse spurred the gold market here...)

Leveraged speculators, on the other hand – forced out of gold dealing by last autumn's credit crunch – have now built up their largest-ever position in bullish gold futures and options.

According to latest data from US regulator the CFTC, the "net long" balance of bullish minus bearish bets by hedge funds and other non-industry players added further to early Sept.'s 20% jump in the week-to-last-Tuesday.

Now equivalent to 793 tonnes of metal, the speculators' net-long position in futures & options is nearly 14% greater than its previous peak of Jan. 2008.

Gold ETF positions have also pushed higher, but only slowly. Standard Bank estimates 42 tonnes have been added to global trust-fund holdings since the start of Sept., with nine tonnes added last week to make a total hoard of 1,687 tonnes.

"I think a big increase in production from the world's gold mines would drive the gold price back down," says Evy Hambro, co-manager of BlackRock's Gold & General Fund, in an FT interview.

"But it takes many years to build a new gold mine, and we don't see that happening in the near future.

"Also significant [would be] exploration success," says Hambro, attributing a large part of the last decade's Four-Fold Rise in Gold to declining mine output.

"If people were to discover large new sources of gold, or a new technology that would lower the cost of production, making formerly uneconomic deposits economic today, that would also have a material effect on the gold market. But we can't see that at the moment."

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