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
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
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Physical Demand "Will Determine Support for Gold" while Selloff was "Driven by Euro Weakness"

Commodities / Gold and Silver 2011 Dec 19, 2011 - 06:07 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleWHOLESALE MARKET gold bullion prices rose to $1607 an ounce Monday lunchtime in London – 0.5% up from last Friday's close – while European stocks and commodities were broadly flat and government bond prices eased.

Silver bullion meantime rose to $29.36 per ounce just ahead of New York's open – 1.2% down on last week's close.

Earlier on Monday Asian stock markets sold off following news of North Korean leader Kim Jong Il's death. South Korea's Kospi index fell 3.4%, while on the currency markets the South Korean Won sold off while the Dollar strengthened.

Gold bullion will fall below $1500 per ounce during the next three months, according to a poll of 20 hedge fund managers, economists and traders conducted by news agency Reuters.

"You're looking at Euro weakness, rather than anything else, as the driving force behind the sell-off [in gold bullion last week]," reckons David Jollie, analyst at Mitsui Precious Metals, adding that many traders will be reluctant to buy gold so close to the end of the calendar year. 

"Whatever your [longer-term] view, you have to ask what the chances are of making money by the end of the year...that says to a lot of people that this is not a market to get longer in."

Over in New York, the difference between the number of bullish and bearish contracts held by noncommercial gold futures and options traders on the Comex exchange – the so-called speculative net long – fell 10.6% in the week ended last Tuesday, the latest data from the Commodity Futures Trading Commission show.

"The key factors that will determine how supported the gold market is on the downside will be whether the 'sticky' ETP [exchange-traded product] holdings remain relatively stable and whether physical demand responds to much lower prices," says a research note from Barclays Capital.

The volume of gold bullion held to back shares in the world's largest gold ETF – the SPDR Gold Trust – has fallen 1.4% since the end of last month to just under 1280 tonnes. Over the same period, gold bullion prices have dropped around 8%.

European finance ministers are meeting Monday in an effort to meet a self-imposed deadline for arranging €200 billion of loans promised to the International Monetary Fund at the European Union summit earlier this month. Ministers also hope to make progress on drawing up new budget rules for national governments.

"They'll try to get as much done as they can before Christmas," says Carsten Brzeski, Brussels-based senior economist at ING Group.

"But it's doubtful they'll put markets in a Christmas mood...there is still so much uncertainty."

Ratings agency Fitch warned on Friday that it may downgrade Belgium, Cyprus, France, Ireland, Italy, Slovenia and Spain. Fellow ratings agency Moody's meantime announced that it has cut Belgium's rating by two notches to Aa3.

"A 'comprehensive solution' to the Eurozone crisis is technically and politically beyond reach," said a statement from Fitch.

"Of particular concern is the absence of a credible financial backstop. In Fitch's opinion this requires more active and explicit commitment from the [European Central Bank] to mitigate the risk of self-fulfilling liquidity crises for potentially illiquid but solvent Euro Area Member States."

ECB president Mario Draghi however says his organization will not step up its program of buying government bonds on the open market – said to be capped at €20 billion per week.

"People have to accept that we have to, and always will, act in accordance with our mandate and within our legal foundations," Draghi says an an interview in today's Financial Times.

"The important thing is to restore the trust of the people – citizens as well as investors – in our continent. We won't achieve that by destroying the credibility of the ECB."

Fitch's warning follows a similar move by Standard & Poor's earlier this month, which saw S&P put every Eurozone member on CreditWatch negative. 

Back in August, S&P cut its rating on US sovereign debt. Newswire Bloomberg today suggests that downgrade has proved to be "absurd", since US Treasury bond prices have since gained more than 4%.

"It is the ability to print one's own currency to pay government bond investors back under any circumstances that makes a government bond a government bond, i.e. a (credit) risk- free asset for hold-to-maturity investors," points out Elga Bartsch, London-based chief European economist at Morgan Stanley in London, in a recent client note.

Here in the UK, chancellor George Osborne is expected to give his full backing to the Independent Commission on Banking and promise to pass legislation by 2015 that will separate investment and retail banking.

UK house prices meantime have fallen 2.7% over the last 12 months, according to figures published today by Rightmove.

"It looks like no nation, no market, no investor is free from this negative outlook. And gold is no exception," says a note from Swiss gold bullion refiner MKS.

"Gold appears to be playing a difficult role at the moment," adds the latest note from German precious metals group Heraeus.

"On one side it is the stability anchor in times of economic and financial crisis, on the other hand there are increasing signs...that gold is in wake of the equity and interest markets."

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