Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
Gold Bullhorns Quieted for a Day, at Least - 22nd Feb 19
US Auto Loans - Americans Missing Car Payments Is a Symptom of a Much Bigger Problem - 22nd Feb 19
Stock Traders Must Be Cautious Part III - 22nd Feb 19
Stock Traders Must Stay Optimistically Cautious II - 22nd Feb 19
Sheffield FlyPast Footage - "Mi Amigo" US Bomber Crash Memorial Endcliffe Park - 22nd Feb 19
Sheffield "Mi Amigo" Memorial Fly Past , BBC Crew Setting Up Stage for Breakfast TV Endcliffe Park - 21st Feb 19
Stocks Closer to Medium-Term Resistance Level - 21st Feb 19
The Stock Market’s Momentum is Extremely Strong. What’s Next for Stocks - 21st Feb 19
QE Forever: The Fed's Dramatic About-face - 21st Feb 19
Gold Technical Perspective – Why So Bullish? - 21st Feb 19
Sheffield "Mi Amigo" Memorial Fly Past at 8.45am on 22nd Feb 2019 - 20th Feb 19
Here’s The Real Reason You Stress About Money - 20th Feb 19
Five Online Marketing Predictions that will Matter in 2019 - 20th Feb 19
Has Gold Price Reached Upside Resistance Near $1340-1360? - 20th Feb 19
So Many Things are Not Confirming Stock Market Rally - 20th Feb 19
Forex Trading Management: The Importance of Being Prepared - 19th Feb 19
Gold Stocks are Following This Historical Template - 19th Feb 19
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Momentous Week for Gold, Did anybody miss the boat?

Commodities / Gold and Silver 2010 Nov 09, 2010 - 07:49 AM GMT

By: Miles_Banner

Commodities

Last week saw a momentous week for gold. The much touted second round of quantitative easing (QE2) from the US Feds sent stock indices and precious metals higher.


Just a few hours before the FOMC released their statement on Wednesday the gold price was briefly sold off. Then straight after the announcement the gold price took another sharp fall breaking through $1,330 per ounce (troy). From there it gradually regained strength and carried on through Thursday and Friday, ignoring the good US jobs data to reach a new all time high of $1,398.

In Monday’s trading the gold price smashed through $1,400 an ounce.

Is the dollar doomed?
The US dollar has slid into dangerously oversold territory once again, but this time there’s no reprieve in sight. So far this year gold has gained over 27.5 percent in dollar terms.

The Financial Times quoted Citigroup’s head of FX strategy, Steven Englander, as he highlighted the problems now facing the dollar…

“We think that reserve managers will contribute to the next stage of dollar weakness as QE2 confirms their worst fears about the Fed’s intentions and the quality of their reserves portfolios.”

“The Fed’s QE2 announcement, whilst not a shock, just serves to remind reserve managers that they will have even more dollars in their portfolio if they do not move aggressively.”

“The historical record suggests that under these circumstances they are very likely to become dollar sellers in coming weeks.”

What will benefit from QE2
As the dollar slides and inflation rises common inflation hedges could see a boost. Rare commodities and precious metals are at the front of inflation hedging methods… The gold price is once again being fuelled from excessive dollars.

In the currencies markets the Euro is also experiencing another bout of weakness as peripheral countries fail to inspire any confidence. But it should come as no surprise that the Chinese are buying up Portuguese debt. The dollar has been seriously undermined by the recent wave of Fed bond purchases. Diversification is the next phase.

David Hale of David Hale Economics in the Financial Times writes…

“The recent gold price rally is the first stage of a multi-year bull market that will drive the gold price to at least $2,000 an ounce by 2015… Potentially the most important new factor in the gold market is China. China now has more than $2,400bn of foreign exchange reserves, but only 1.7 per cent of this is invested in gold. … Some Chinese officials have publicly called for the central bank to purchase 10,000 tonnes of gold. … There is no way to predict the timing of China’s future gold purchases, but there can be little doubt they will create a demand for gold that will dwarf all other factors during the next quarter-century and guarantee large price gains irrespective of what happens to Federal Reserve policy.”

By Miles Banner
Gold Price Today

We leave you this week with a fascinating article forwarded to us by one of our readers, James. It’s a Bloomberg story that reveals the insatiable appetite for gold amongst central banks – Central Bank Gold Holdings Expand at Fastest Pace Since 1964

© 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