Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Friday Stock Market CRASH Following Israel Attack on Iranian Nuclear Facilities - 19th Apr 24
All Measures to Combat Global Warming Are Smoke and Mirrors! - 18th Apr 24
Cisco Then vs. Nvidia Now - 18th Apr 24
Is the Biden Administration Trying To Destroy the Dollar? - 18th Apr 24
S&P Stock Market Trend Forecast to Dec 2024 - 16th Apr 24
No Deposit Bonuses: Boost Your Finances - 16th Apr 24
Global Warming ClImate Change Mega Death Trend - 8th Apr 24
Gold Is Rallying Again, But Silver Could Get REALLY Interesting - 8th Apr 24
Media Elite Belittle Inflation Struggles of Ordinary Americans - 8th Apr 24
Profit from the Roaring AI 2020's Tech Stocks Economic Boom - 8th Apr 24
Stock Market Election Year Five Nights at Freddy's - 7th Apr 24
It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- 7th Apr 24
AI Revolution and NVDA: Why Tough Going May Be Ahead - 7th Apr 24
Hidden cost of US homeownership just saw its biggest spike in 5 years - 7th Apr 24
What Happens To Gold Price If The Fed Doesn’t Cut Rates? - 7th Apr 24
The Fed is becoming increasingly divided on interest rates - 7th Apr 24
The Evils of Paper Money Have no End - 7th Apr 24
Stock Market Presidential Election Cycle Seasonal Trend Analysis - 3rd Apr 24
Stock Market Presidential Election Cycle Seasonal Trend - 2nd Apr 24
Dow Stock Market Annual Percent Change Analysis 2024 - 2nd Apr 24
Bitcoin S&P Pattern - 31st Mar 24
S&P Stock Market Correlating Seasonal Swings - 31st Mar 24
Here's a Dirty Little Secret: Federal Reserve Monetary Policy Is Still Loose - 31st Mar 24
Tandem Chairman Paul Pester on Fintech, AI, and the Future of Banking in the UK - 31st Mar 24
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Slips as U.S. Dollar and Sterling Rally

Commodities / Gold & Silver 2009 Sep 29, 2009 - 11:43 AM GMT

By: Adrian_Ash


THE PRICE OF GOLD fell again at the start of Hong Kong trade on Tuesday, dropping further to near-3 week lows by lunchtime in London at $986.50 an ounce.

Asian stock markets meantime closed the day higher, but European shares fell as the Euro fell back vs. the Dollar and Yen.

The British Pound jumped higher despite a raft of poor UK data, driving the gold price in Sterling below £620 an ounce – down 1.4% from Monday's five-month high.

"Gold needs to stay above $990 on the close to keep our bullish view alive," says a short-term technical analysis from Scotia Mocatta, the bullion bank.

"A break of $990 opens up $972 and $957, the former breakout lines. Topside resistance is now seen at $1000."

But "gold remains very well supported despite recent Dollar strength," counters Walter de Wet at Standard Bank, pointing to a target for the Euro – which typically moves in the same direction as US gold prices – of $1.50 by year-end.

Standard Bank's currency strategists expect the European single currency to hit $1.55 "if not $1.60" early in 2010.

"Combined with seasonal jewelry demand, our gold view remains one of buying on dips," says de Wet, reporting "some physical buying returning to the market" as prices fell to the mid-$980s."

MKS Finance in Geneva, a division of the Swiss refining group, also reports "Asia-based operators seeing jewelry demand pick up in India as the festive period approaches.

"[But] gold will need to see ongoing good physical and ETF demand in order to resist to pressure" from the rebounding US Dollar.

Early Tuesday the Dollar bounced from a 6-month low vs. the Yen beneath ¥88.50, and rose for the fifth day running against the Euro.

Crude oil fell 1% towards $66 per barrel. Short-dated government bonds also fell in price, pushing yields higher.

"Driven by a combination of investment and speculative purchases, extended by technically driven trades, and the lack of any robust aware of a strong likelihood of [gold] correction early in the fourth quarter" warns a new report from Frederic Lasserre at French banking giant SocGen today, quoted by Bloomberg.

"A certain hesitancy has emerged amongst fast money to buy gold at the moment due to fears of excess long positioning in Comex gold futures," says Swiss bank UBS's London analyst John Reade.

"We continue to expect a deeper correction in gold and silver in coming weeks."

Looking back at the last 10 years of market-beating gold returns, "Investors who dared place some of their eggs in gold in recent years have been nicely rewarded for what they did," says National Bank of Canada economist Matthieu Arseneau.

"However, the time has come now to revise their positions [because] risk aversion is gradually returning to pre-crisis levels and inflation fears should abate."

Looking at the past three decades, "In times of economic recovery, the return on gold falls well short of the return on the stock market," Arseneau says.

His time-frame includes both the "long boom" of 1982-2000 – when US stock prices rose 13-fold but gold fell by two-thirds – as well as the record equity bull of 2002-2007, when US stocks doubled over 60 months and the gold price gained more than 170%.

Over on the data front Tuesday – and ahead of US housing-price and Consumer Confidence data – Japan reported its sharpest ever year-on-year drop in retail prices, down 2.4% in August from Aug. '08.

Spain reported consumer price deflation of 1.0% year-on-year for this month.

Adjusted for inflation, Spain's retail sales fell 4.0% in August – the sixteenth consecutive month of falling sales.

Here in the UK, the early CBI Distributive Trends survey pointed to a rebound in consumer spending.

But the data came against a worse-than-expected fall in GDP, a decline in consumer credit, a sharp drop in money-supply growth, and a fresh surge in the UK's balance of trade deficit to a two-year record of £11.4 billion ($18bn) between April and July.

Today the Bank of England met with leading commercial economists from the City to discuss its program of quantitative easing and the commercial banks' failure to pass the £150 billion spent so far ($225bn) onto consumers and business as loans.

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

© 2005-2022 - 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