Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Dollar Danger Threatens Gold as Euro Hits 2-Yr Low

Commodities / Gold and Silver 2012 Jul 23, 2012 - 12:59 PM GMT

By: Ben_Traynor

Commodities

WHOLESALE gold bullion prices fell to $1569 an ounce during Monday morning's London trading – 0.9% off Friday's close – as stocks, commodities and the Euro also traded lower and US Treasuries gained, following news that two Spanish regions plan to ask for bailouts.

Silver bullion fell to $26.88 an ounce – a 1.9% drop on where it ended Friday.


Volumes of gold bullion held by exchange traded funds (ETFs) saw net losses last week, while on the currency markets this morning the Euro hit a new two-year low against the Dollar Monday, dropping below $1.21. As a result, the US Dollar Index, which measures the Dollar's strength against other major currencies, hit a new two-year high.

"The great danger for the gold price is the stronger Dollar, because of its long-term negative correlation to gold," says Eugen Weinberg, head of commodity research at Commerzbank.

"That's definitely still dampening the interest of investors from the United States...but in Euro terms, gold is trading near six-month highs...it's more about Dollar strength than gold weakness."

European stock markets sold off sharply this morning, with the Euro Stoxx 50 index of blue chip companies down around 2.5% by lunchtime, and Spain's Ibex down 5.3%.

Yields on 10-Year Spanish government bonds meantime set a new Euro-era record Monday, rising above 7.5% following news on Friday that Valencia's regional government will ask Madrid for a bailout. On Sunday, the Spanish region of Murcia said it too will seek aid, with newspapers reporting several other regional governments plan to make similar requests.

Spain's biggest region, Catalonia, is "working very hard to pay bills normally", its economy minister Andreu Mas-Colell told Italian newspaper La Repubblica.

"But the pressure on our treasury is very high because the markets are closed [to us]."

Elsewhere in Europe, officials from the European Commission, European Central Bank and International Monetary Fund – collectively known as the 'troika' – are due to visit Athens tomorrow to assess progress meeting bailout conditions.

"If Greece doesn't fulfill those conditions, then there can be no more payments," German vice chancellor Philipp Roesler said Sunday, adding that the idea of Greece leaving the Euro "has long ago lost its terror".

"There is no firewall around Greece," counters Paul Donovan, senior economist at UBS.

"Or, if there is, it is constructed of high quality, dry kindling wood doused in gasoline. If Greece goes other countries seem certain to leave...if politicians have lost a sense of terror over the prospect of a Greek exit it suggests that politicians have lost any comprehension of economic reality."

In New York meantime, the difference between bullish and bearish contracts held by noncommercial gold futures and options traders – the so-called speculative net long – rose slightly in the week ended last Tuesday, Commodity Futures Trading Commission figures show. The number of speculative long and short positions both fell however.

"Overall positioning in gold remains weak," says a note from Standard Bank.

"We are skeptical about the sustainability of any gold rallies over the short term."

The world's biggest gold ETF the SPDR Gold Shares (GLD) saw a second straight day of outflows on Friday, sending holdings of gold bullion down to 1254.6 tonnes, just above where they were six months ago.

"ETFs are increasingly skeptical about gold," says Standard Bank, noting that gold ETFs worldwide saw a 13.7 tonne decline last week, the biggest weekly drop since March.

"A lot of fund managers are just content sitting on cash without loading up on anything at all," adds one trader in Singapore.

"They are happy to be in as stable a portfolio as possible."

"Evidence of a significant response from physical buyers is needed first," says a note from UBS, "before the investment community can be expected to follow suit."

UBS adds that its gold sales to India "do not indicate any improvement as yet and neither does combined gold volumes on the Shanghai Gold Exchange, which have been 30% below average this month."

India needs to see a "social and cultural revolution" in its attitude towards gold, according to the deputy governor of the central bank.

"Ninety percent of the gold demand is jewelry or to offer to God," KC Chakrabarty told an audience in Mumbai over the weekend.

"Both have to stop... Wearing gold as an ornament was a culture when you were a rich society, when you were contributing to 30% of the GDP of the world. Today, we have become a poor country, we need to change our culture."

By Ben Traynor
BullionVault.com

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 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.


© 2005-2022 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