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 Stagflation Effects Stocks - 5th Dec 21
Bitcoin FLASH CRASH! Cryptos Blood Bath as Exchanges Run Stops, An Early Christmas Present for Some? - 5th Dec 21
TESCO Pre Omicron Panic Christmas Decorations Festive Shop 2021 - 5th Dec 21
Dow Stock Market Trend Forecast Into Mid 2022 - 4th Dec 21
INVESTING LESSON - Give your Portfolio Some Breathing Space - 4th Dec 21
Don’t Get Yourself Into a Bull Trap With Gold - 4th Dec 21
4 Tips To Help You Take Better Care Of Your Personal Finances- 4th Dec 21
What Is A Golden Cross Pattern In Trading? - 4th Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - Part 2 - 3rd Dec 21
Stock Market Major Turning Point Taking Place - 3rd Dec 21
The Masters of the Universe and Gold - 3rd Dec 21
This simple Stock Market mindset shift could help you make millions - 3rd Dec 21
Will the Glasgow Summit (COP26) Affect Energy Prices? - 3rd Dec 21
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Fall on Fed Minutes Disappointment

Commodities / Gold and Silver 2012 Jul 12, 2012 - 06:29 AM GMT

By: Adrian_Ash


Best Financial Markets Analysis ArticleThe WHOLESALE BULLION gold price continued to weaken Thursday morning in London, dropping to new 2-week lows beneath $1565 per ounce on what analysts called "disappointment" over the latest monetary policy minutes from the US Federal Reserve.

Asian and European stock markets fell hard, while wheat and corn prices again bucked a further drop in the commodities market.

Following the US Fed minutes – which showed only a "few" policy-makers wanting to expand the central bank's quantitative easing money creation scheme – the Euro currency today dropped to its lowest level since June 2010 below $1.21.

Silver bullion also gave back the last of July's rally to date, trading down to $27.75 per ounce.

"We are still confident that the current slide in the price of gold is nothing more than a temporary weakness," writes Commerzbank's head of commodity research Eugen Weinbergin Frankfurt today.

"The high levels of uncertainty resulting from the ongoing sovereign-debt crisis in the Eurozone clearly suggest a much higher gold price."

"We think that $2000 an ounce is sort of the right number," said Bank of America-Merrill Lynch's head of global commodity and multi-asset strategy research Francisco Blanch to CNBC on Wednesday, forecasting a further $500 billion of US quantitative easing by year-end.

"We believe that ultimately the Fed will be forced to do quantitative easing. If it happens in September, as our economists expect, we will get a rally sooner in gold.

"Probably we will touch $2000 an ounce sometime next year."

Longer-term, however, other analysis from Bank of America-Merrill Lynch now recommends selling gold, not buying it, as "a secular contrarian" strategy.

"[You] should be buying equities, European assets, Japan and financial & telecom stocks and selling gold, bonds, emerging markets and resources and consumer staples stocks," says June's Longest Pictures report from Michael Hartnett, chief global equity strategist.

Credit Suisse and BMO Research yesterday joined the growing move to cut commodity-price forecasts for 2012 and beyond, with the Swiss investment predicted only "a modest recovery in the second half of the year" and the Canadian financial services firm lopping 10% off its broad prediction for raw material costs.

"The bear market [in mining equities] has intensified with a vengeance," says BMO Research, adding that late-2012 should see gold trade at $1600 per ounce rather than the previous forecast of $1700.

Even so, "The prevailing economic environment remains supportive for the gold price with the European sovereign debt crisis and wealth preservation demand playing on the upside, while weaker Indian jewelry demand weighs on the downside of the metal."

Today in Kolkata, "There is a slight pick-up [in demand to buy gold ]," said one jewelry wholesaler to Reuters, "but this will taper off in a few days" unless local prices continue to ease from their recent record highs.

"The strong US Dollar makes local [gold] prices, such as in Indonesian Rupiah, not very attractive," agrees a Singapore bullion dealer, also quoted by the newswire.

Asian premiums on 1-kilo gold bars – over and above the world's benchmark London prices – have continued to firm, however, reaching $1 per ounce in Singapore and up to $1.40 in Hong Kong, a rise of more than 50% from the start of July.

China's 2012 demand to buy gold may reach 900 tonnes, and so account for one ounce in every 5 sold worldwide, says Philip Klapwijk, head of Thomson Reuters GFMS, launching the consultancy's Chinese language edition of Gold Survey 2012 this week.

"China not only remained the largest gold producer in the world in the first quarter but also became the top gold jewelry market in the world for three consecutive quarters," notes Albert Cheng, managing director Far East for market-development organization the World Gold Council, also quoted by the People's Daily Online.

Officially, China's inflation rate slowed to 2.2% per year in June, and "The falling inflation rate will create more room for policy easing to bolster economic growth and would be positive for gold investment," reckons senior analyst Su Yanbo at research agency Baiinfo in Beijing.

"Gold prices are expected to rebound in the second half of the year."

Last week the People's Bank of China surprised analysts by unexpectedly cutting interest rates in the world's second-largest economy.

Neighboring South Korea today did the same, taking the Bank of Korea's target rate down a quarter-point to 3.0% "to help the South Korean economy return to a long-term growth trend," according to governor Kim Choong-Soo.

Here in London, Barclays Capital meantime cut its US economic growth forecast from 2.5% to 1.5% for the second quarter.

Deutsche Bank has also cut a full percentage point of its GDP forecast for the United States, taking it down to 1.4%.

By Adrian Ash

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 , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

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