Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

The Currency Markets and the Gold Price

Commodities / Gold and Silver 2010 Mar 16, 2010 - 12:37 AM GMT

By: Miles_Banner

Commodities

Best Financial Markets Analysis ArticleDear Reader, Over the past few months there has been a growing amount of interest in the currency markets especially the pound, the euro and the dollar. Each has faced issues that have exposed weaknesses. The pound has long come into criticism for being overvalued. The euro has been dragged through fresh scepticism by the Greek crisis, and the dollar continues to be questioned as the reserve currency of choice.


The three charts below plot the course of the gold price in 2010, measured in terms of the three aforementioned currencies (taken from the PM gold fix).

[We update these each week on our gold price chart page.]

What’s obvious when you place the three charts together is how the three currencies follow the same general pattern, albeit with different acuteness. The announcement of fiscal measures by Greece can be seen across all of the charts at the beginning of February. This is where we see a sudden depreciation of gold [see our article The Dollar Rally Threatens to Upset the Gold Price]. To date this depreciation has been retraced over the pursuing weeks, but it highlights the contagious affect of currencies and the need to keep a close eye on international markets.

At the moment there are no clear signs for us to follow. No trend that looks certain. The markets, as they have been for the past few months are being driven by fear… led by news. We are now one year on from the bear market low of 2009 and the FTSE is up 60 percent, the S&P 500 up 70 percent. What’s more the VIX index shows bullish sentiment.

The VIX index (AKA the ‘fear gauge’) measures the anticipated volatility of the S&P 500. When the index is high it signifies a high probability of volatility. At the moment it is trading at the bottom of its two year range. This tells us that fear is leaving the market – and that risk aversion is eroding. But what about the fundamentals?

“In February alone, the US government ran a record deficit of $221 billion. And February is a short month. Annualize that and you’ve got about $2.5 trillion in excess spending.” Notes Bill Bonner at The Daily Reckoning

Here, in England, we also see a constant stream of bad news…

  • The pound has fallen 28 percent so far this year and figures recently showed industrial production fell unexpectedly by 0.4 percent in January.
  • Iain Campbell points out in BreakingViews, house prices will have to fall by another 17 percent to reach the historically normal ratio with average earnings.
  • And even more worrying is the widening trade deficit. In January the deficit in goods and services reached £3.8bn – the highest monthly total since August 08.

A devalued pound is supposed to galvanise manufacturing and production in Britain, and it still may. But these things take time to work their way through. At a time like this demand for British products is not obvious. There are many obstacles on the path to recovery for the euro zone members, which were the recipients of nearly 55 percent of uk exports in 2009. The US is yet to start consuming at the same levels they use to and the emerging markets have no reason to look as far as Britain for their products.

As the world’s major currencies still look unsupported and the fundamentals for gold are still in place, physical gold remains the currency of choice for many central banks.

China reveals it will not partake in the IMF bullion sale

Whilst gold is still an attractive form of currency to central banks, China has taken the move to disassociate itself from the IMF bullion sale.

A spokesman for the China Gold Association told The China Daily newspaper that it is "not feasible for China to buy the IMF bullion, as any purchase or even intent to do so would trigger market speculation and volatility."

They went on to say that rather than buy gold from the IMF, China would buy gold directly by acquiring gold mines abroad.

At prices nearing all time highs it’s not surprising China will look at other sources to bulk up their reserves. Stealth appears to be the name of the game. The IMF sale continues to go on with no announcement yet as to who will buy. But we wait to see who and at what price the winning bid is made. That shall surely have an impact on the gold price. Stay tuned to see what happens next.

Digger Gold Price Today

P.S Digger writes a weekly email analysing the gold price and the gold industry. Visit Digger at Gold Price Today (http://goldpricetoday.co.uk).

© 2010 Copyright Gold Price Today - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 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