Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Stock Market Rescued by the Fed Again? - 24th Sep 21
Are Amazon Best Cheap Memory Foam Mattresses Any good? Bedzonline £69 4ft Small Double ECO Example - 24th Sep 21
Evergrande not a Minsky Moment - 24th Sep 21
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
HOW TO SAVE MONEY ON CAR INSURANCE - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Falls to Two-Month Low, But Demand Remains Solid

Commodities / Gold & Silver 2009 Jul 10, 2009 - 10:21 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD SLID yet again early Friday in London, recording the lowest AM Gold Fix since 8th May at $910 per ounce, and nearing Wednesday's two-month lows in the spot market at $905.


Down 2.5% down from last Friday's finish, the Dollar-price of Gold showed its worst weekly performance since the start of June ahead of today's Wall Street opening.

"In the near term, day-to-day moves continue to be influenced by the direction the Dollar takes," said one Shanghai analyst to Reuters this morning.

"In the longer term, inflationary expectations remain."

Japan however reported the fastest drop in wholesale prices since at least 1960 today, while US crude oil contracts dropped below $60 per barrel for the first time since mid-May, down 18% from the 2009 high hit just over a week ago.

The FTSE100 stock index here in London fell to its lowest level since late April. Tokyo's Nikkei ended the week down more than 5% from last Friday.

"Physical [Gold] demand remains depressed and it may take lower prices to prompt buying," says the July edition of Metal Matters from London market-makers Scotia Mocatta, pointing to a short-term technical target of $896 after the Dollar-price completed a head-and-shoulders pattern last month.

"However, the big picture outlook for Gold remains bullish...Competitive devaluation amongst numerous hard currencies will lead to further trouble for the financial markets. This is likely to keep interest in Gold running at a high level.

"As such, we would see any sell-off in Gold as a medium term buying opportunity."

On the currency markets today, the zero-yielding Japanese Yen pushed higher against all other major currencies, signaling "risk aversion" amongst Tokyo funds pulling cash home.

The Euro also fell against the US Dollar, but Gold Prices fell faster still, dropping to a 3-month low of €652.60 per ounce.

For UK investors now Ready to Buy  Gold, the price bounced off a fresh 6-month low of £557.60 overnight.

Sharply lower from the first quarter of 2009, daily volatility in the British Pound's effective exchange rate, the Sterling Index, remains twice the level of its two-decade average.

"Aggressive global monetary stimulus is reflationary, [it] has defused the tail risk of deflation, and has helped to lift commodity prices," reckon Richard Berner and David Greenlaw, the chief US and fixed-income economists at Morgan Stanley in New York.

Calling the ongoing drop in asset and consumer prices "disinflation" rather than deflation, "The near-term risk of lower underlying inflation gives the Fed latitude to maintain accommodation [i.e. zero rates and Quantitative Easing] for now," they go on.

But "unlike those who believe that low inflation and easy money will persist into 2011, we think that tighter monetary policy will be needed in 2010 to prevent inflation from rising too far too fast."

Over in India, meantime, the world's hungriest gold market, the federal government in Mumbai yesterday said it's issued 6,775 new licenses to jewelers to use its hall-marking centers and adding to a 20% increase for the year-to-April.

The Gold Hallmarking Scheme was launched in 2008 to encourage consumer confidence in bullion jewelry, obliging manufacturers to hit mandated standards of fineness.

Earlier this week, the Indian government also doubled import duties on Gold Bullion, despite a 50% drop in metal inflows from this time last year.

"Strong physical [Gold] demand is not likely to be triggered unless the metal breaks below the 900 level," says MKS Finance, a division of the Swiss refining group.

"Ironically, it is the marginal physical demand coming in above 900-905 that is preventing an aggressive selloff to penetrate that level."

Walter de Wet at Standard Bank meantime believes that "Buyers of gold in the physical market are now willing to pay a higher price for gold than a few months ago," pointing to strong physical flows in the wholesale market centered in London.

"We believe that sellers of scrap gold now require a much higher Gold Price to part with their gold than in February. Against the global economic backdrop, we view this as bullish for gold over the next six months. "

On the supply side of the market yesterday, South Africa reported a 10.5% drop in May's Gold Mining output from 12 months before.

"Gold Mining is a shrinking industry, it's been like that for almost a decade," says Dave Mohr, chief economist at Citadel Investment Services.

"We have run out of our high-grade gold deposits," he told AFP, adding that after dropping to second and then third place in world rankings behind China and the United States, South Africa is now likely to be overtaken by Australia.

By Adrian Ash
BullionVault.com

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 www.BullionVault.com , 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

© 2005-2019 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