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
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Plunges by 11% But Doesn't Change Long-Term Fundamentals

Commodities / Gold and Silver 2011 Aug 25, 2011 - 08:48 AM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleTHE PRICE OF GOLD in professional wholesale dealing sank further on Thursday morning, plunging to a 9-session low of $1704 early in London – a drop of more than $200 per ounce from Tuesday's new record high.

"A glance at the gold price on a logarithmic scale suggests a correction was overdue," says Societe Generale's daily "macro" note.


"[But] the spectre of higher core inflation [as highlighted by last week's US consumer-price data] can only add to the attractiveness of gold, especially with interest rates so low.

"This makes the 11% decline since Tuesday’s peak seem all the more bizarre."

Pointing to what he calls "the key level on the weekly chart of $1729," Russell Browne at Scotia Mocatta says that a "break of this level would indicate an 'Outside Week' [with prices setting new highs but falling sharply lower] and warn of a deeper correction."

The 11% fall in the gold price "would be more concerning" however, says a note from Mitsui's London team, "were it not for the fact that gold's meteoric rise over the past month makes retracements of this size relatively unsurprising.

"Moreover, we maintain that the economic fundamentals that have been bullish for gold remain so, and that corrections such as this do not make the target price of $2000 any less realistic."

Wednesday brought heavy sales of gold both in the US derivatives and exchange-traded trust fund markets.

The SPDR Gold Trust ETF – larger by value than even the S&P500 ETF on Monday – shed another 26 tonnes of bullion as share-holders exited the fund, taking this week's tonnage drop to 4.5%.

US derivatives exchange the CME meantime raised margin payments on its gold futures for the second time in two weeks, taking the initial and maintenance payments to trade 100-ounce contracts more than 55% higher from mid-August.

"The margin hike...contributed to the liquidation," reckons David Thurtell at Citigroup.

"A lot of hot money has entered the complex and the rally was done too much in too short a time."

Citing volatility in gold prices as the reason – rather than the absolute price level – "I think we're seeing more and more diversification in people's portfolios," said CME executive chairman Terry Duffy to FoxBusiness overnight.

"Commodities are now definitely [used]...for diversification, where 10 or 12 years ago people didn't [even] see them as an asset class."

Broad commodity indices held little changed Thursday, as food-stuffs fell but energy and base metals ticked higher.

Swiss investment bank UBS today cut its growth forecast for China – now the world's No.2 private gold consumer – thanks to "much weaker growth prospects in developed economies.

"A significant drop in export growth, which could start in the fourth-quarter of 2011, is also expected to affect manufacturing investment and consumption," says UBS economist Tao Wang.

Rising 25% by tonnage in the year to July, private Chinese gold demand has doubled over the last decade to equal nearly 2% of annual household savings.

Looking ahead to Friday's much-anticipated Jackson Hole central banking speech from Ben Bernanke of the Federal Reserve, "We await further evidence on the softness of the US economy before we would consider QE3 our base case," says today's note from Standard Bank's commodity team.

"[But] regardless of additional quantitative easing, we believe that the long-term upside for gold remains in place."

Foreign exchange rates were meanwhile little changed Thursday morning as global stock markets rose, leaving the gold price drop for non-Dollar investors also around 10% from Tuesday's new record highs.

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.


© 2005-2019 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