Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Strong U.S. Dollar Forces Gold Lower

Commodities / Gold & Silver 2009 Jan 06, 2009 - 11:42 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD fell further in London on Tuesday morning, sliding 2.2% from Monday's US close to hit $840 an ounce – its lowest Dollar-level since Christmas Eve.

European stock markets rallied, while government bonds also retreated, pushing 10-year US Treasury yields up to 2.51%.


Crude oil rose above $50 per barrel as Israel expanded its ground offensive in Gaza, and European states including Austria, Bulgaria, Greece, Macedonia and Turkey said their supplies of natural gas have been cut since Russia halted flows to Ukraine in its dispute over a long-term pricing deal.

"The pressure remains on Gold Prices ," says today's note from Mitsui, the London precious metals dealer, "and our $845 support has now been taken out."

UK gold investors also saw the price dip to a two-week low on Tuesday morning. The Gold Price in Euros , however, held little changed as the single currency fell hard on the forex market – down 10¢ from this time last week to $1.3340.

"Seems the [New Year] reallocation of funds in commodity indexes is adding supply to the gold market," Mitsui continues. "With a lack of Indian physical demand due to an inauspicious period [on the Hindu calendar], one has to wonder where the support will come from?"

Western Gold Investment demand continues to grow, however, with the New York-listed SPDR Gold ETF continuing to keep a record volume of gold in trust – up by almost one-quarter from the start of 2007 to vault 780 tonnes in bank-owned facilities.

As a proportion of all speculative betting on Comex futures and options, new US data for last week showed the number of bullish trades at 90% – considerably above the 5-year average of 81%.

The total outstanding volume of Gold Futures contracts held by hedge funds and other "large speculators", however, stands almost one-half below the record peak of January last year.

The commercial traders of refineries, mints, wholesalers and bullion banks, meantime, closed 2008 right in line with their bullish ratio's 5-year average of 30.8%.

"People [actually] want real gold," says Peter Hambro, chairman of the eponymous (and highly leveraged) Russian gold miner, interviewed today by the Financial Times .

"It is the physical market driving the price."

Looking ahead to Gold in 2009 , "The amount of [government] money being pumped into the system is vast," Hambro goes on. "Interest rates get lower and lower, and the government is practically buying bus tickets to put more money in.

"At some stage, that money will start chasing real assets, and the deflation you see now will be followed by amazing inflation across the board."

For now, and "while safe-haven buying of Gold Coins and bars continues," says John Reade – commodity strategist for Swiss bank UBS in London – "this may not be enough to drive gold higher.

"Certainly, we are seeing no jewelry demand at the moment."

The Bombay Bullion Association yesterday reported a 47% drop in India's gold imports for last year from 2007's record level.

But that said, "Gold's move in the last couple of days is almost entirely due to the strength of the Dollar," says Reade. And for anyone considering Gold vs. Other Investment Asset Classes in 2009 , "the worst-case scenario for [all other investment] markets would be caused by a run on the Dollar," warns Tim Bond – head of global asset allocation at Barclays Capital, also speaking to the FT .

A fresh panic out of the world's No.1 reserve currency following its sharp bounce in the second-half of 2007 would "terminate the Fed's attempts to Quantitatively Ease and reduce credit spreads," says Bond.

"The effect on global markets would be catastrophic, with most asset values other than Gold collapsing."

International money market data, released late last night, showed net positioning against the US Dollar rose on the forex market last week, up to a net-short position of $942 million from the previous week's $559m.

That compares with a record short-Dollar position of almost $34 billion hit in late 2007, and the long-Dollar position of $15bn reached in Oct. '08.

For every bet on the Dollar falling, of course, traders have to bet that another currency will rise – but "as a result of the global scope of the recession," writes the head of David Hale Global Economics for the FT today, "there is no country that wants its exchange rate to appreciate.

As central banks everywhere slash interest rates and increase the money supply to devalue their currencies, "The clear alternative [therefore] to the Dollar in 2009 is that ancient form of money, gold," Hale goes on.

"Precious metals could emerge as a hedge for private investors suspicious of central banks and fearful of inflation."

Looking at the mechanics of Buying Gold in 2009 , "Interest rates are very, very low right now, so that reduces the holding cost," notes Imtiaz Ahmed of Macquarie First South, speaking to Johannesburg's SAfm and comparing the cost of owning gold against holding official government currencies.

"I think the wind is starting to come to [gold's] back, especially with all this money being thrown around. It's going to be inflationary. I suspect that should be good for gold.

"Gold remains for me a long-term asset play."

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 2008

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

6 Critical Money Making Rules