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
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
S&P SEASONAL ANALYSIS - 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 and Silver Hit New Two-Month Lows as Sentiment Changes

Commodities / Gold and Silver 2011 Jan 21, 2011 - 10:11 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF gold and silver continued to fall in Asian and London trade on Friday, dropping to fresh two-month lows even as the US Dollar slipped on the currency markets.

By lunchtime in London – and compared with New Year 2011's near-record highs – the gold price in Dollars stood 6% lower, in Euros 7.5% down, and in British Pounds nearly 9% lower.


European stock markets meantime ignored a sharp fall in Asian share prices, while Western government bonds ticked lower.

Agricultural and energy commodities bounced from this week's falls.

"The threat of further monetary tightening in China continues to overwhelm precious metals," says Standard Bank's daily note, "with gold and silver the hardest hit.

"Given their high correlation with global liquidity this is to be expected."

"Everybody's getting out," reckons Leonard Kaplan, president of Illinois's Prospector Asset Management, speaking to Bloomberg.

"Look for acceleration on the downside. Historically, when gold prices go down from the highs, they fall precipitously."

"All in all, [2011] will be a bumpy ride for the yellow metal," says the latest Precious Metals Monthly from the VM Group consultancy in London – heart of the world's professional bullion market.

"Continued investment demand will be critical...but as the global economy returns to growth, the perceived necessity to buy gold as an anti-risk device will diminish, unless inflation gets out of hand."

Surging inflation is "always a possibility" however, warns VM in its report for ABN Amro, because governments worldwide "are nervous about raising interest rates in case they snuff out the fledgling recovery."

New data released Friday showed Australian import prices, Japanese industrial activity, and both UK mortgage approvals and retail sales all falling in Dec., defying analyst forecasts for a rise.

Today's near-zero interest rates on cash deposits "will persist" in both the US and Europe, says VM – encouraging savers to buy gold, as well as equities – while "The rise in the Chinese and Indian middle class will [also] continue to support demand."

The Chinese New Year typically marks the strongest period for household gold demand, says BullionVault analysis cited today by MarketWatch.

Since 2005, the Jan-to-March period has seen China's private household gold demand average a rise of 22% from the previous nine months.

Looking at China's latest import data, 2010 saw silver imports (net of exports) rise four-fold from 2009 note analysts at Mitsui in London – a total of 3,500 tonnes.

A heavy seller of silver bullion after lifting the state's 50-year monopoly in 2000, China was a net export of 3,000 tonnes as recently as 2005.

Domestic silver production meantime rose 8.3% to 11,617 tonnes last year, Beijing's official statistics bureau said Thursday.

Gold production – which also includes an "unknowable" volume of scrap-metal recycling, as well as new mining output – grew by 6% from 2009 to 615 tonnes.

"There's an increasing amount of existing jewelry and other gold products that can be recycled, though the actual amount is difficult to estimate," Bloomberg quotes an analyst from Beijing Antaike Information Development.

Back in Friday's action, "Market sentiment has changed," says a Hong Kong dealer in a note. "Physical demand [will now] only show up when price dips."

Silver was "abandoned" by Asian traders overnight, he adds, but here in London the metal  continued to trade in backwardation on Friday morning, with prices for one- through 12-month delivery lower than for immediate settlement.

"That suggests to the lay observer that demand for the physical stuff is at unprecedented levels," says the FT's Alphaville blog.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly 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 2011

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.


© 2005-2022 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