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
VR and Gaming Becomes the Metaverse - 7th Dec 21
How to Read Your Smart Meter - Economy 7, Day and Night Rate Readings SMETS2 EDF - 7th Dec 21
For Profit or for Loss: 4 Tips for Selling ASX Shares - 7th Dec 21
INTEL Bargain Teck Stocks Trading at 15.5% Discount Sale - 7th Dec 21
US Bonds Yield Curve is not currently an inflationist’s friend - 7th Dec 21
Omicron COVID Variant-Possible Strong Stock Market INDU & TRAN Rally - 7th Dec 21
The New Tech That Could Take Tesla To $2 Trillion - 7th Dec 21
S&P 500 – Is a 5% Correction Enough? - 6th Dec 21
Global Stock Markets It’s Do-Or-Die Time - 6th Dec 21
Hawks Triumph, Doves Lose, Gold Bulls Cry! - 6th Dec 21
How Stock Investors Can Cash in on President Biden’s new Climate Plan - 6th Dec 21
The Lithium Tech That Could Send The EV Boom Into Overdrive - 6th Dec 21
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

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold "Still Respecting" Post-Lehman Crisis Trend

Commodities / Gold and Silver 2012 Jan 25, 2012 - 08:44 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleSPOT MARKET gold bullion prices dropped to $1653 an ounce Wednesday morning London time – down 1.7% from Monday's high – while stock markets, commodities and the Euro all slid and US Treasuries gained after the head of the International Monetary Fund suggested the European Central Bank could take losses on its Greek bond holdings.

Silver bullion fell to $31.67 – down 1.8% for the week so far.

"On the weekly chart, gold is still respecting the uptrend off the October 2008 low, with key support at $1550," says the latest report from technical analysts at gold bullion bank Scotia Mocatta.

"If the level of Greek debt held by the private sector is not sufficiently renegotiated," IMF managing director Christine Lagarde said this morning," then public sector holders of Greek debt should also participate in the efforts."

The ECB – which started buying Greek bonds in May 2010 when the crisis first escalated – remains opposed to seeing its holdings of Greek debt restructured, according to newswire Bloomberg, which cited anonymous sources.

"Once again, policy makers leave the room and hope the ECB will fill in," says Thomas Costerg, London-based European economist at Standard Chartered. 

"The risk is that by putting the ECB on board, as the IMF asks, this could result in debt swap negotiations restarting from scratch, which could mean additional delay to an already over-stretched timetable."

Debt restructuring formed part of an agreement reached last October to give Greece a second bailout worth €130 billion – without which it will be unable to pay maturing bonds worth €14.5 billion on March 20.

Over the course of Wednesday morning the Euro handed back all of this week's gains against the Dollar.

In thin trade reflecting the absence of Far Eastern players during the Lunar New Year Week, Dollar gold bullion prices were down 0.8% for the week by Wednesday lunchtime.

"In the absence of sustained physical interest, gold is prone to a little more downside this week as bullion continues trading with global risk sentiment," says VTB Capital analyst Andrey Kryuchenkov, adding that the US Federal Reserve looks "set to remain accommodative for now which is, as ever, gold-beneficial in the long run."

"The Fed's stance should continue to support gold," agrees Marc Ground, commodities strategist at Standard Bank.

"Fundamentally, we believe that the long-term causal drivers of gold are global liquidity (defined as the Fed’s Balance Sheet plus FX reserve holdings) and real interest rates."

The Fed will announce its latest interest rate decision later today, and is widely expected to leave its target federal funds rate within the range 0% to 0.25%. In addition, it will publish for the first time Federal Open Market Committee members' projections for the appropriate target rate over the next few years.

"We expect the rate guidance in the policy statement to move the timetable for current accommodation well beyond mid-2013 and into 2014," says a report from Citigroup fixed-income strategists Peter Goves and Nishay Patel.

US president Barack Obama yesterday outlined his "Buffett rule" for tax reform, which takes its name from the billionaire Berkshire Hathaway chief executive Warren Buffett.

"If you make more than $1 million a year," Obama said, "you should not pay less than 30% in taxes."

Obama's address came days after Republican presidential candidate Mitt Romney disclosed that he paid 13.9% income taxes on $21.6 million of earnings in 2010. Romney disclosed his tax returns following criticism from his rival for the Republican nomination Newt Gingrich.

The UK economy meantime declined by 0.2% in the fourth quarter of 2011, official data published Wednesday show. Were the economy to shrink for a second consecutive quarter, Britain would be back in technical recession.

"[A negative growth rate]gives additional ammunition to those at the Bank of England who want to do more quantitative easing sooner rather than later," reckons Peter Dixon, London-based global equities economist at Commerzbank, adding that the news "gives some more credence to the idea they will move in February."

The Bank's Monetary Policy Committee will make its next policy announcement on February 9.

"With inflation falling back and wage growth subdued, there is scope for interest rates to remain low, and, if necessary, for further asset purchases," said Bank of England governor Mervyn King Tuesday, referring to the possibility of further quantitative easing.

The news that Britain's economy had shrunk came a day after it was revealed that net public debt has breached £1 trillion for the first time in history.

The Bank of England's latest survey of business conditions meantime shows spending, hiring, exports growth, borrowing and investment all weakening at the start of 2012.

Inflation in the cost of labor and raw materials eased slightly. But annual inflation in the price of imports "remained elevated" says the Bank's summary for January.

While the Pound has stayed relatively steady against the Dollar and Euro over the last 12 months, the Sterling price of gold bullion is up more than 25% compared to this time last year.

Importers of gold bullion in India meantime are delaying buying gold following last week's decision by the government to switch to a 2% ad valorem import tax – as opposed to the previous flat rate by weight – the Wall Street Journal reports. 

Since the new tax is calculated by value, importers who delay will benefit if the price of gold subsequently falls.

High profile investor Dennis Gartman has said that while the gold bull market "is probably still extant", he is now "neutral" on the prospects for gold bullion.

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 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