Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Investors Hedging Against Fiat Currency Devaluation with Gold, France Calls for ECB Solution

Commodities / Gold and Silver 2011 Nov 17, 2011 - 07:42 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleSPOT MARKET gold bullion prices fell to $1741 per ounce Wednesday lunchtime in London – 2.6% down for the week so far – while stocks, commodities and government bonds also sold off as tensions grew between France and Germany.

As yields on French, Italian and Spanish government debt spiked, leaders of the Eurozone's two largest nations were in disagreement over how best to solve the crisis.

Silver prices fell to $32.83 per ounce – a 5.5% drop for the week – while on the currency markets the Euro held steady against the Dollar at around $1.34. Since the start of the week, however, the Euro has dropped over 2% against the US currency.

"The technical picture [for gold] looks weak," says one Hong Kong gold bullion dealer.

"The US Dollar is strong and there does not seem to be a good solution for Europe... gold is probably not going to break above $1800 soon."

Demand for physical gold, however, has continued to grow in recent months, new figures published today show.

Global gold bullion demand in the third quarter was 6% higher than during the same period a year earlier – coming in at 1053.9 tonnes – according to the World Gold Council's latest Gold Demand Trends report, published on Thursday.

Central banks worldwide remained net buyers in Q3 2011 – purchasing 148.4 tonnes of gold bullion.

"A number of banks continued their well-publicized programs of buying," the report says, "while a slew of new entrants emerged wishing to bolster their gold holdings in order to diversify their reserves."

"We don't know exactly who the central banks are," Marcus Grubb, managing director, investment at the World Gold Council told Bloomberg television this morning.

"But if you look back over the last year, the buyers tend to be those countries that aren't suffering the debt problems we have in Europe. They tend to be the surplus countries in Latin America, Central Asia and of course the Far East. We suspect the buying is coming from those central banks."

Global gold jewelry demand fell 10% year-on-year – with world's biggest market India seeing a 26% drop in jewelry demand by volume. Over the same period the Rupee has fallen 13.2% against the Dollar – with the Rupee gold price hitting all-time highs this week.

Third quarter gold investment demand, by contrast, rose 33% worldwide compared to Q3 2010.
"[Gold's] popularity as an investment asset has definitely increased," said Grubb. "It is a hedge against fiat currencies and a hedge against currency devaluation. For example, in the Eurozone it's particularly attractive at this time as an investment."

European gold demand grew 135% year-on-year to 118.1 tonnes of gold bullion– with Germany Europe's biggest gold buyer.

Elsewhere in Europe this morning, yields on Spanish 10-Year bonds hit a Euro era high of 6.78% Thursday morning. Italian 10-Year yields also spiked, hitting 7.1% at one point.

France and Germany meantime continue to disagree over what role the European Central Bank should play in resolving the crisis. 

"We consider that the best way to avoid contagion is to have a solid firewall," French finance minister Francois Baroin said Wednesday. Baroin has said he would like to see the European Financial Stability Facility granted a banking license, enabling it to access ECB funds.

"We haven't won the argument. We won't make it a casus belli, but naturally we continue to think it would be the best way to bring stability to Europe."

"If politicians believe the ECB can solve the problem of the Euro's weakness," German chancellor Angela Merkel said today, "then they're trying to convince themselves of something that won't happen."

Yields on French 10-Year government debt rose to 3.8% this morning – while the spread above German 10-year yields set a new Euro-era record at 204 basis points (2.04 percentage points).

"Unless the Eurozone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the US banking industry could worsen," ratings agency Fitch said Wednesday.

Fitch warned there is a "serious risk" to US banks' creditworthiness as a result of their exposure to European sovereign debt.

Here in London meantime, the volume of gold bullion cleared in October fell from a month earlier, according to figures published Thursday by the London Bullion Market Association.

A daily average of 662.5 tonnes of gold bullion  was transferred between LBMA clearing members last month – down 4.3% from September.

By contrast, October saw a 12.4% rise volume of silver bullion transferred between LBMA clearing members – with an average of 6139.8 tonnes transferred per day.

The total volume of silver and gold bullion traded each day will, however, be several times larger, since the clearing statistics only show net transfers of gold between London's largest, market-making bullion banks.

Elsewhere, in the silver market, leading precious metals consultancy Thomson Reuters GFMS published its Interim Silver Market Review today, giving its latest silver market estimates. 

Silver fabrication demand – which includes the jewelry sector – is forecast to grow nearly 4% this year, with more modest growth in 2012.

Industrial demand "will reach a new record high in 2011, with a near 4% gain", the report says, while total supply is expected to remain "broadly stable" – with an estimated 4% growth in mining output and 10% growth in scrap supply expected to be offset by falls in government sales and producer hedging.

By Ben Traynor

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

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(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.

© 2005-2019 - 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