Malaysia Gold Investment

Slowing physical gold demand not a real concern

2012-01-29T07:12:00.000+08:00

For the first time since mid-November 2011, our Standard Bank Physical Gold Flow Index moved into negative territory yesterday—this indicates that physical market participants
have turned net sellers. This lack of physical demand partly explains the inability of gold to make a sustained move beyond the $1,730 level.

The lacklustre interest in physical gold can partly be explained by the absence of Far East participants away for the lunar New Year celebrations (China, Singapore, Malaysia and Indonesia). However, as we move into next week it is important to consider the other factors that are currently weighing on physical demand for gold and whether these factors might evaporate when the Far East returns to the market.

One of these factors has been increasing scrap scales, especially out of South East Asia. However, compared to historical levels, these sales are not substantial and we don’t expect them to be a significant drag on prices over the coming week. Secondly, while Indian physical buying had been picking up momentum as a) the rupee appreciated over the past few weeks, and b) we move into Indian wedding season, the recent rally in prices might dampen enthusiasm. Again, we don’t view this as a serious threat to gold in the short term. The market already appears to be comfortable with the fact that Indian gold demand will not provide the support that is has in previous years, mostly, as a result of a weaker rupee and higher interest rates.

Consequently, we feel that weaker Indian demand is already largely discounted in current prices. So while slowing physical demand might provide some resistance during price rallies, we do not feel that it would be the cause of prices moving significantly lower. Investor enthusiasm, spurred by the US real interest rate falling to new lows according to US government inflationlinked bonds (off the back of the Fed’s assurances that it expects to maintain accommodative monetarily policy until the end of 2014), should keep gold prices buoyant.

Although, while the improvements in market positioning over the past few weeks (before this week’s rally) have been encouraging, their tentative nature indicates a speculative market that remains not entirely convinced of gold’s shortterm prospects. So as we move into next week, we expect the recent euphoria to subside and some profit taking to kick in.

Gold price held firm near $1,730 per ounce

2012-01-28T07:08:00.002+08:00

The gold price held firm near $1,730 per ounce at closing after fourth quarter U.S. GDP growth came in at 2.8%, below the 3.0% consensus estimate among economists. The price of gold hovered in a tight range between $1,718 and $1,728 in overnight trading, while the U.S. dollar stabilized against many of the world’s leading currencies. Silver held near unchanged at $33.60 alongside the gold price, while U.S. equity markets opened modestly lower following the disappointing GDP report.

Ole Hansen, senior manager at Saxo Bank, commented that “The strong rally in gold changed what prior to the (Fed) announcement had been a test of gold’s resolve. The Fed statement changed all that, and from thinking that the gold rally potentially only had one year left to run, it could now continue for longer…The ‘off’ button on the printing press has well and truly been taped over.”

Barclays Capital analyst Suki Cooper offered a bullish take on the gold price as well, but urged a bit of caution in the near term. “Precious metals have taken off near term, breaking through several important resistance levels,” Cooper wrote in a note to clients. However, she contended that “We are wary of markets being overstretched though and look for gold and silver to correct ahead of prior highs.”

Over the longer-term, Cooper asserted that “Coupled with continued central bank appetite for gold, the broader macro backdrop remains conducive for gold price gains, given negative real interest rates, concerns over longer-term inflationary pressures and uncertainty surrounding the financial markets and economic outlook.”

Gold price strength was the particularly dovish tone emanating from the Federal Open Market Committee (FOMC) meeting

2012-01-27T08:07:00.001+08:00

The gold price climbed $12.08, or 0.7%, to $1,723.63 per ounce Thursday morning as the yellow metal built on yesterday’s Fed-induced rally. Silver added to its gains alongside the gold price, by $0.27, or 0.8%, to $33.61 per ounce. Equity markets throughout Asia and Europe were largely higher, while U.S. markets looked to open in the black as well.

The primary catalyst for yesterday’s gold price strength was the particularly dovish tone emanating from the Federal Open Market Committee (FOMC) meeting. There, the Federal Reserve chose to extend the timeframe for its zero-interest rate policy to late-2014 from mid-2013. Additionally, it introduced new language in the FOMC statement by saying that it intends to maintain a “highly accommodative” monetary policy stance for the foreseeable future.

Along with the statement, for the first time the Ben Bernanke-led Federal Reserve released a summary of economic projections from its individual members. In particular, the Fed provided a chart showing the time at which the central bankers feel it will be appropriate to conclude its accommodative monetary policy stance. Eleven of 17 members identified this time as 2014 or later, with four choosing 2015 and two choosing 2016.

Commenting on the Fed’s actions, Credit Suisse strategist Carl Lantz characterized the central bank as even more dovish than meets the eye. In a note to clients, Lantz wrote that “The fact that the FOMC was willing to provide late 2014 as the earliest likely date for the first rate hike suggests that the actual expectation is significantly beyond late 2014…We suggest that by announcing that the first hike is unlikely to occur until ‘at least’ late 2014, the FOMC is actually providing the bottom of a confidence band around the committee’s intended estimate for the first hike…it would appear that the ‘core’ of the committee and a strong plurality of voters are in the 2015 or 2016 camps.”

With the Fed expected to keep the monetary spigots wide open for the next several years, real interest rates are likely to remain in negative territory for the better part of the decade. Furthermore, judging by the ascent in the price of gold on Wednesday, it appears that investors may agree with Lantz that rates are unlikely to rise until 2015 or 2016.

Gold and silver prices surged higher alongside after the Federal Reserve extended the time period for its near-zero interest rate policy

2012-01-26T08:03:00.002+08:00

Gold and silver prices surged higher alongside after the Federal Reserve extended the time period for its near-zero interest rate policy from mid-2013 to late-2014.

The Federal Reserve did not launch a third round of quantitative easing (QE3) at its Federal Open Market Committee (FOMC) meeting today, but did extend the timeframe for near-zero interest rates from mid-2013 to late-2014.

In addition, the tone of the Fed statement was a bit more dovish than that from last month’s meeting. Specifically, the latest statement said that “the Committee expects to maintain a highly accommodative stance for monetary policy” – which was language not included in the prior statement.

Another key difference was that the one dissenting vote came from a hawkish rather than dovish member. Last month, Charles Evans dissented because he supported “additional policy accommodation.” This time, Jeffrey Lacker “preferred to omit the description of the time period over which economic conditions are likely to warrant exceptionally low levels of the federal funds rate.”

Fed Chairman Ben Bernanke will hold his third-ever post-FOMC press conference at 2:15pm ET today.

Following the release of the Fed statement, gold futures turned sharply higher. The gold price had already pared its losses by climbing back from $1,649.20 to $1,658 prior to the announcement, and subsequently rallied above $1,670 per ounce.The rebound in gold coincided with a move lower in the U.S. dollar, which relinquished its gains against a basket of foreign currencies.

Gold succumbed to profit-taking yesterday

2012-01-25T09:45:00.002+08:00

After reaching a six-week high, gold succumbed to profit-taking yesterday. The trend has continued into this morning, with the absence of Far East physical demand (due to Lunar New Year holidays) opening up the metal to further downside. The rest of the Gold complex has followed gold lower, although platinum came under particular pressure from liquidation overnight on TOCOM. It did however rebound quickly, thereafter resuming a more sedate downward trend.

Better-than-expected PMI readings out of the Eurozone have also dampened investors enthusiasm for safe-haven assets. The figures showed that the services sectors in both Germany and the Eurozone expanded. German manufacturing grew (analysts expected a contraction), while Eurozone manufacturing did contract, although at a slower pace than expected.

Today is the start of the FOMC’s two-day meeting. This will be the first meeting where the Fed will release its projections on the Fed funds rate. Given the strong positive relationship between gold and low real interest rates, the release of the Fed’s view on its key lending rate tomorrow will be of interest. Currently, the Fed has assured markets that rates will remain low through to mid-2013, at least. If the view appears more hawkish, we could see gold, as well as the other precious metals, lose some ground.

Gold support is at $1,661 and $1,652. Resistance is $1,681 and $1,691.

Gold Price Climbs as Europe Looks to Boost Firepower

2012-01-24T15:27:00.002+08:00

The gold price climbed $4.00 to $1,671 per ounce Monday morning against the backdrop of a weaker U.S. dollar. Gold prices advanced through their 50-day moving average and have now rallied $108 thus far in 2012. The U.S. Dollar Index fell 0.37 to 79.77, led by a higher euro, which recaptured the 1.30 level against the greenback. Helping to power the gold price was news out of Europe that Italian Prime Minister Monti and European Central Bank President Draghi were working towards doubling the capacity of the European Stability Mechanism (ESM) from €500 billion to €1 trillion.

Commenting on the recent gold price ascent, ANZ bank senior commodity strategist Nick Trevethan wrote in a note to clients on Friday that “Gold has had a fairly good run so far this year, maybe this is time to consolidate a little. A pause here would probably be a healthy sign. After that, I think the next move is likely to be up towards $1,680.”

Trevethan went on to say that “I think physical flows may slow a little next week. Chinese buyers will still take the time to come to the market if prices fall significantly. So, I think there’s going to a floor under the market, initially at $1,650, but I can’t see a big fall to below $1,600.”

Looking ahead to the coming week, Ben Bernanke and the Federal Reserve will be in focus as Wednesday’s FOMC meeting approaches. A growing set of economists have speculated that a third round of quantitative easing (QE3) is forthcoming due to stagnation in the U.S. labor and housing markets and ongoing sovereign debt concerns in Europe. However, the consensus view among economists remains that the Fed will wait to launch QE3 until later in the year. Investors will therefore be keeping a close eye on the price of gold for clues as to the direction of U.S. monetary policy.

The remainder of the week includes several key U.S. economic reports – including Pending Home Sales on Wednesday; Weekly Jobless Claims, Durable Goods, Leading Indicators, and New Home Sales on Thursday; and Fourth Quarter 2011 GDP and University of Michigan Consumer Sentiment on Friday. If the data continues to indicate tepid economic growth, the gold price is likely to remain well supported, while better than expected reports could provide a headwind for the yellow metal.

Gold Price Rebounds, Fed should launch a $1 trillion QE3 plan in the near future

2012-01-21T22:14:00.002+08:00

The gold price rebounded from earlier losses Friday morning to trade back near unchanged at $1,658 per ounce. The spot price of gold initially fell to $1,644.20 amid profit taking in the yellow metal, but bounced back after a worse than expected report on existing home sales in the U.S. The SPDR Gold Trust (GLD), the world’s largest gold ETF and gold price proxy, recovered from an intra-day low of $159.95 to $161.39 per share.

The gold price reacted positively to the last report in a busy week of U.S. economic data. Existing home sales for December increased 5.0% on a month-over-month basis, below the 5.2% consensus estimate among economists. The worse than expected report confirmed comments made earlier this week by Federal Reserve Governor Elizabeth Duke on the challenges that remain in the housing market.

“One of the questions that potential buyers or potential investors are looking at is how much inventory is there still to come on the market,” Duke stated. “Such low levels of sales” suggest “it’s still going to be a long time before the inventory backlog is worked through.”

Despite several encouraging reports in other sectors of the economy, the housing market continues to be a significant drag on U.S. economic growth. The Fed has discussed these headwinds in considerable detail in nearly every edition of the FOMC minutes and the Beige Book in recent years. As a result, a growing set of economists see the Fed launching a third round of quantitative easing (QE3) this year. In contrast to the first two rounds, however, QE3 is expected to concentrate specifically on the purchase of mortgage-backed securities to help alleviate problems in the housing market.

Miller Tabak’s chief economic strategist, Andrew Wilkinson, contended in a note to clients yesterday that the Fed should launch a $1 trillion QE3 plan in the near future. “There seems little point in waiting to implement further easing, and to do so could confuse the message the Fed is trying to deliver at a point in time when it is trying to make its communication with the public clearer.” If Ben Bernanke and his fellow central bankers take Wilkinson’s advice, the price of gold is likely to be one of the prime beneficiaries of such monetary policy.

Gold enjoyed a relatively good US session

2012-01-20T07:59:00.002+08:00

Gold enjoyed a relatively good US session, although momentum did slow in overnight Asia trade. For the most part, the upside was attributable to bolstered investor confidence, owing in part to the IMF announcement that it is planning to extend its lending capacity by $500bn. Despite the US and UK saying that they would not commit to such a move, the market took heart that this would help ease the fiscal problems facing the Eurozone.

This renewed confidence has seen markets adopt a cautious risk-on stance, pulling the dollar down and consequently easing downward pressure on precious metals and commodities in general. Another leg of support for gold (and for the other precious metals as they follow) has been the consistently strong physical demand out of China as buyers gear up before the New Year holidays.

However, with today the last day of work for many Chinese, this support cannot be relied on over the coming weeks. Unless Indian buying fills the gap, which is unlikely given the relatively lacklustre activity we’ve seen over the past few days, we could see gold tracking the dollar even more closely as we move into next week.

Once again the effect of US data flow (housing, jobless claims, inflation, Philadelphia Fed survey) on market confidence and consequently the dollar, will dictate most movements in Gold prices this afternoon. It will be interesting to see how the complex holds up in Asia in the absence of Chinese participants.

Gold support is at $1,651 and $1,637. Resistance is $1,671 and $1,677.

Gold came under pressure yesterday as new highs prompted some profit-taking

2012-01-19T08:08:00.003+08:00

Gold came under pressure yesterday as new highs prompted some profit-taking. The selling gained momentum as Asian participants questioned the sustainability of the recent renewal of confidence in financial markets. However, there was good support evident at the $1,645 level for gold, which limited the losses among the other precious metals. This support seemed to stem largely from Chinese buyers stocking up ahead of the New Year holidays (with tomorrow being the last day of work for many Chinese).

Sticking with China, many are anticipating the PBoC to lower reserve requirements by tomorrow. This is also adding to support for Gold, and metals in general. However, as outlined yesterday, we find that historically, changes in the reserve requirement have little bearing on commodity prices over the long term. Therefore, any positive reaction to a lowering of reserve
requirements we would deem as knee-jerk, with a downward correction following soon afterwards.

This morning we’ve seen gold see-saw, with upward momentum quickly stymied by profit-taking and physical interest preventing prices from falling too far. The rest of the precious metals complex continues to take gold’s lead on the up, although PGM have come under more downward pressure. The weight on PGM is most likely due to markets finally moving on from the Eskom story in South Africa. Dollar movements, in particular against the euro, once again appear as a major driver of Gold prices. To this end, the dollar’s reaction to this afternoon’s US industrial production data could have a significant bearing on Gold.

Gold support is at $1,642 and $1,629. Resistance is $1,669 and $1,682.

Gold prices climbed above the $1,650 level on Speculation China Set to Ease

2012-01-18T06:50:00.003+08:00

The gold price surged Tuesday morning, rising $17.05 to $1,661 per ounce. Gold prices climbed above the $1,650 level on speculation that Chinese policy makers were set to implement aggressive monetary accommodation following a weaker than expected gross domestic product figure. GDP in China grew 8.9% in the fourth quarter, the slowest pace in over two years. Investors and traders pushed up the prices of not only gold, but stocks and commodities as well following the news.

With regard to the Chinese GDP report, several analysts contended that slower economic growth is likely to continue in the months ahead. Economists at Citigroup wrote in a note to clients that “We expect GDP growth to slow more markedly in the first quarter due to the sharp investment slowdown under way.” At J.P.Morgan, economists predicted that GDP growth will slow to 7.6% in the first quarter of 2012 on a year-over-year basis. If these forecasts materialize, gold prices are likely to benefit from the policy response of China’s central bank.

Gold Price held firm Monday after another key credit rating downgrade in Europe

2012-01-17T08:52:00.002+08:00

The gold price advanced $4.82, or 0.3%, to $1,643.30 per ounce in light-volume trading on Monday amid modest weakness in the U.S. dollar. The price of gold moved higher alongside the euro currency, which rose 0.2% to 1.2664 against the dollar in afternoon trading.

The price of gold held firm Monday after another key credit rating downgrade in Europe. Standard & Poor’s – which last Friday lowered its rating on nine euro zone countries – cut its rating on the European Financial Stability Facility (EFSF) to AA from AAA due in part to the deteriorating economic fundamentals associated with the sovereign debt crisis.

Commenting on the downgrades, analysts at Societe Generale wrote in a note to clients that “The trigger for the downgrade was the failure of euro-area policy makers to deliver a sufficient solution to date.” Additionally, the firm contended that the markets had been expecting the downgrades, which therefore would not affect the firm’s euro zone GDP estimate of zero growth in 2012. Instead, Societe Generale pointed toward the upcoming European Union summit on January 30 as the next critical event for the ongoing crisis.

As for the upcoming week in the U.S., the economic calendar contains several key items likely to impact gold prices. The Empire Manufacturing Index comes out Tuesday morning, followed by the Producer Price Index (PPI) on Wednesday. The Consumer Price Index (CPI) – another key measure of inflation – will be released on Thursday, along with weekly jobless claims and the Philadelphia Fed Index. The week then concludes on Friday with the Existing Home Sales report for December. If the reports continue the recent trend of better than expected economic data, the gold price could come under pressure, which disappointing reports would likely provide a tailwind for the price of gold.

Gold prices retreated on the back of a stronger U.S. dollar and weakness in the broader stock and commodity markets

2012-01-14T10:05:00.002+08:00

The gold price declined Friday morning, sinking $11.00 to $1,638.50 per ounce. Gold prices retreated on the back of a stronger U.S. dollar and weakness in the broader stock and commodity markets. The U.S. dollar climbed against the euro and commodity currencies such as the Canadian and Australian dollars.

While the gold price has faced many headwinds in recent months in the form of better than expected U.S. economic data, such was not the case on Thursday. Retail sales increased at the slowest pace in seven months, by 0.1%, compared to the 0.3% consensus estimate among economists. In addition, weekly jobless claims rose to 399,000, well above the 375,000 projected level. The two disappointing data points suggested that the U.S. economy may not be rebounding as quickly as previously anticipated. Moreover, the reports are likely to provide the Federal Reserve with further evidence to maintain its highly dovish stance on monetary policy.

Across the Atlantic, the gold price was the beneficiary of ongoing accommodative monetary policies from two other of the world’s largest central banks. The Bank of England held its main interest rate at a record low of 1.0% and cautioned that “We should be realistic about the risks; the uncertainty in the euro area continues to have a chilling effect on the UK as well as elsewhere.” Following the announcement, several analysts contended that the BOE will expand its £275 billion quantitative easing program by £50 billion at next month’s meeting.

As for the European Central Bank, it kept its benchmark interest rate at a record low of 1.0% following two consecutive reductions. ECB President Mario Draghi subsequently stated at his post-meeting press conference that “The monetary stance is and will remain accommodative. Uncertainty is very high. We will monitor all developments and stand ready to act.”

Gold price is likely to remain well supported

2012-01-13T07:59:00.003+08:00

The gold price climbed $13.87 to $1,656.19 per ounce Thursday morning after the European Central Bank and Bank of England each kept their benchmark interest rates at record lows. The 0.8% gain in the spot price of gold was also fueled by weakness in the U.S. dollar, which fell 0.5% against a composite of the world’s leading currencies. The euro rose 0.7% to near 1.28 against the dollar as well after better than expected sovereign debt auctions in Spain and Italy.

In terms of specific economic factors, the Beige Book pointed out that consumer spending “picked up in most Districts, reflecting significant gains in holiday retail sales compared with last year’s season.” Demand for nonfinancial services – including professional and transportation services – strengthened further as well. “Manufacturing activity generally continued to expand,” while “reports from financial institutions generally indicated a slight uptick in loan demand by businesses, along with improvements in overall credit quality.”

In spite of the largely positive economic picture represented by the Beige Book, the gold price maintained its gains as investors were able to digest the Fed’s report. The resiliency of the price of gold indicated that although the economy may indeed be improving, the Ben Bernanke-led central bank is unlikely to alter its dovish stance on monetary policy anytime soon.

The need for continued accommodative monetary policies was also emphasized this week by two new voting members of the Federal Open Market Committee – John Williams and Sandra Pianalto, Presidents of the San Francisco and Cleveland Federal Reserve Banks, respectively. In their first public speeches since becoming FOMC voting members, each argued that the challenging U.S. employment market is likely to take many more years to properly heal.

Williams asserted that “In this situation, it’s vital that the Fed use all the tools at its disposal to achieve its mandated employment and price-stability goals.” So long as these “tools” continue to involve the use of near-zero interest rates and dovish rhetoric, the gold price is likely to remain well supported.

Gold prices advanced despite strength in the U.S. dollar

2012-01-12T07:31:00.002+08:00

The gold price continued to rebound Wednesday morning as the yellow metal climbed $7.00 to $1,639 per ounce. Gold prices advanced despite strength in the U.S. dollar, which gained against both the pound and the euro. Technical analysts are focused on whether the price of gold will hold above its 20-day moving average, currently at $1,636 per ounce. The gold price closed out 2011 in the midst of a 20% correction, but has now rallied $117 off its December 29th low of $1,522 per ounce.

Looking out over a longer time frame, Dundee Securities chief economist Dr. Martin Murenbeeld wrote in his most recent weekly Gold Monitor that the fundamental underpinnings for higher gold prices remains intact. “Our key bullish factor has not changed for years: monetary reflation. In response to record government debt levels, slow growth/recession, and a drift in much of the OECD towards deflation as the household sector continues to deleverage and governments are forced to cut entitlements, the full weight of economic stimulus falls on the shoulders of central banks”

“With a 1930’s environment threatening to engulf Europe,” Murenbeeld added, “the ECB and other central banks (including the PBoC) will maintain extremely loose monetary policies throughout 2012; the Fed, if nothing else, will wish to ring-fence the US financial sector in the likely event the Eurozone is downsized or splits. The monetary reflation factor alone, depending upon the specific crisis, could see gold rise well above $2000.”

Murenbeeld – who has been bullish on the gold price for the large majority of the past decade – went on to say that “Other factors should continue to favor gold in 2012, including central bank gold demand, which should add to demand for years to come, and geopolitical turmoil in the Middle East and elsewhere. The latter could cause periodic surges in the gold price, surges likely also to be reflected in the oil price…In short 2012 will, somewhat like 2008, be a contest between recession and monetary reflation. We are forecasting reflation will win the day for gold.”

All roads lead to money printing

2012-01-11T08:08:00.002+08:00

The gold price surged higher Tuesday, climbing 1.8% to $1,639 per ounce. The price of gold broke out above its 200-day moving average and has now advanced $76, or 4.8%, thus far in 2012. Stocks and commodities rose alongside gold as investors speculated that Chinese policy makers were set to pursue more aggressive monetary easing.

Since reaching its $1,923 all-time high on September 6, 2010, the price of gold has now fallen 14.7%. However, the strong move to the upside in gold in the New Year has prompted many analysts to ponder whether the multi-month correction in gold prices is over. Long-time gold bull Bill Fleckenstein discussed the yellow metal’s recent travails in his latest weekly MSN Money column. “I’m sure precious-metals bulls were extraordinarily frustrated late in 2011, as gold and silver were sold regardless of the news,” he wrote. “In any event, as the year ended, the stage was set for a potent rally in the metals, and that was what I think we saw starting (last) Tuesday. The questions now are whether the last week of December was the low for this entire decline, and whether we get some sort of test of those prices (as well as what such a test might look like).”

“Since so many people trade gold on a technical basis, the determining factor for what the next pullback looks like may be dictated by whether it can get over its 200-day moving average,” Fleckenstein added.

As for the macroeconomic factors influencing gold prices, Fleckenstein contended that “Central banks the world over mean to print however much money it takes to avoid anything remotely approaching a declining cost of living, with only the Europeans being unwilling to stand up and say that is exactly what their goal is. Thus, the long-term outcome is not in doubt, although the short-term twists and turns are, as always… in the end, all roads lead to money printing, debased currencies and inflation until the printing press is taken away.”

One key reason that the gold price maintained its gains

2012-01-10T07:44:00.002+08:00

The gold price, at $1,620 per ounce, opened to the upside Monday morning. Gold prices traded higher amid weakness in the U.S. dollar, which came on the back of news out of Europe that policy makers may complete a new budgetary legal framework by the end of the month. The euro climbed to 1.275 against the U.S. dollar. S&P 500 stock futures rose modestly, gaining 1.80 to 1276. Commodities traded higher with agricultural products leading the way.

One key reason that the gold price maintained its gains despite the positive reports is that upon closer review, the employment data was not nearly as encouraging as first suggested. While the non-farm payrolls data substantially beat expectations, 42,000 of the jobs added were due to a “seasonal quirk in the courier category,” that is likely to be reversed in next month’s report, according to Morgan Stanley economist David Greenlaw. Furthermore, in just the past year, the civilian population rose by 1.7 million, while the labor force increased by just 274,000, indicating that those not in the labor force rose by 1.4 million. If those individuals were to be counted in the data, the unemployment rate would be above 11%, a level generally consistent with a recession.

Jeremy Friesen, a commodity strategist with Societe Generale, echoed these sentiments in a recent note to clients. ”There have been good data out of the U.S., but ultimately the U.S. can’t decouple from the European crisis. There are going to be enough reasons to be worried about global growth and the financial system in the next quarter or two, and gold should benefit from that.”

The Federal Reserve also appears to be well aware that the U.S. labor market is not rebounding as strongly as the data appears to suggest. Last week’s Fed minutes showed that “Employment at state and local governments declined further, and both long-duration unemployment and the share of workers employed part time for economic reasons remained elevated. Initial claims for unemployment insurance moved down, on net, since early November but were still at a level consistent with only modest employment gains, and indicators of job openings and businesses’ hiring plans were little changed.” Moreover, in its economic outlook, the Fed forecasted that the U.S. unemployment rate “will remain elevated” through 2013.

The Fed minutes went on to note that “a number of (FOMC) members indicated that current and prospective economic conditions could well warrant additional policy accommodation.” While the Fed has yet to officially launch a third round of quantitative easing (QE3), the dovish tone of the latest minutes suggest that a third money printing campaign may not be far away. Based on the performance of the gold price last week, it appears that this development has also not been lost on the gold.

Gold will reach alltime highs again in 2012

2012-01-08T08:54:00.000+08:00

While gold is pushing towards its 200d MA at $1,633, we are not convinced that it can sustain a break above this level yet because liquidity remains locked up as the European interbank
market continues to malfunction. The stress in the interbank market remains evident in the Euribor/OIS spread which remains high, at 0.95%. During periods of no interbank stress, this spread is usually less than 0.10%.

Funding issues continue to result in money being deposited with the ECB instead of being utilised within the greater financial system and, as a result financial assets, including gold, are
struggling. We believe gold will move higher as funding stress declines — but not as soon as in January. The lack of liquidity and leverage is reflected in the futures market, where for example
gold open interest in COMEX is still very low.

In the physical market, we continue to see steady buying of gold. But this demand is more likely to provide support for gold on dips below $1,600 rather than push it substantially higher.
The improved physical demand is reflected in the SGE premium which was at $8.50/oz yesterday, up from around $2/oz in mid-December, but still well below the $15+/oz premium
seen in October. We expect Chinese physical demand to remain steady, and even improve ahead of Chinese Lunar New Year.

We would look to buy gold on dips towards $1,560. We also believe that the metal, in the next few weeks, is likely to find strong resistance on approach of $1,650. We still believe that gold will reach all-time highs again in 2012. Initially, we antici-pated this in Q1:12, but we now see a growing probability that it may only happen in Q2:12.

Gold prices traded in a tight range

2012-01-07T08:50:00.003+08:00

The gold price traded near unchanged Friday at $1,623 per ounce despite the stronger than expected December jobs report released this morning from the Labor Department. Gold prices traded in a tight range following the news that nonfarm payrolls rose by 200,000 and the unemployment rate fell to 8.5% – the lowest level since February of 2009.

Gold resiliency was also bolstered by positive commentary from two investment banks. Citigroup analyst Tom Fitzpatrick wrote in a report to clients that the gold price sell-off in recent months “has run its course and a rally is now back on the cards.” As long as the price of gold remains above $1,535 per ounce on a weekly basis, Fitzpatrick contended that gold’s long-term uptrend remains intact and it will proceed to reach a new all-time high of $2,400 per ounce later this year.

Jeffrey Wright, a senior research analyst at Global Hunter Securities, offered a more conservative but still constructive gold price outlook for 2012. Wright forecasted that the price of gold will remain range bound between $1,450 and $1,750 per ounce until a more concrete resolution to the European sovereign debt crisis materializes. ”I don’t think the bull market is over,” he noted, but “near term consolidation” could ensue for at least six more months.

If the euro crisis is resolved in some fashion later this year, Wright predicted that the markets will shift their focus to the United States’ dire fiscal situation. This development would put pressure on the U.S. dollar and provide a tailwind for the gold price. Investors “are going to go ‘what about us?” he asserted. ”We have no ability to repay this debt and the only way to pay it is to devalue the currency.” In this scenario, “gold will definitely come back into focus when depreciating the dollar becomes a practical policy.”

The rebound in Gold was not accompanied by weakness in the U.S. dollar

2012-01-06T07:55:00.002+08:00

Gold rebounded Thursday from earlier losses as the broader financial markets returned to positive territory in afternoon trading. COMEX gold futures fell below $1,600 per ounce this morning but later climbed toward $1,625, while silver bounced back from $28.69 to trade higher by 1.0% at $29.37 per ounce.

The rebound in Gold was not accompanied by weakness in the U.S. dollar, however, as the greenback maintained the large majority of its gains against a composite of foreign currencies. The euro remained particularly weak against the dollar, as it fell 1.2% to 1.2791.

While Macquarie discussed several near-term headwinds for the sector, it reiterated its longer-term bullish outlook for the gold price and the shares of gold producers. The firm’s favorable stance was based in large part on the expectation that negative real interest rates will remain in place for the foreseeable future. Additionally, Macquarie noted that the firm’s precious metals strategist, Stephen Harris, is forecasting a 2012 average gold price of $2,006 per ounce.

“Gold prices have been driven by the outlook for US real short-term rates,” Macquarie wrote in a report to clients. “Gold has historically gained nearly 25% when real US rates have been below zero. With policy rates at zero and substantial slack remaining in the US economy…real US rates are likely to remain negative for the next several years. Market conviction in that view may increase in early 2012 if the Fed moves, as we expect, to tie future rate policy directly to an unemployment rate target.”

(QE3) – a potential key catalyst for the gold price in 2012

2012-01-05T07:48:00.002+08:00

The gold price oscillated around the $1,600 per ounce level Wednesday, digesting yesterday’s 2.5% gain. News this morning that bank deposits at the European Central Bank’s overnight facility reached an all-time high this week sparked worries that funds are being hoarded – not lent out. Banks parked €453 billion ($591 billion) in the ECB’s overnight deposit facility. Stock prices in Europe fell 0.5% as measured by the Stoxx Europe 600 Index and crude oil slipped 0.6% to $102.39 per barrel.

The gold price and broader markets maintained their gains following the release of the latest Fed minutes late yesterday. The summary of the December Federal Open Market Committee (FOMC) meeting revealed that despite the recent improvement in economic data, the U.S. central bank remains quite concerned about the U.S. economy heading into 2012. The Ben Bernanke-led Fed cited the challenging labor and housing markets, along with the euro crisis, as key factors behind its cautious outlook.

With regard to a third round of quantitative easing (QE3) – a potential key catalyst for the gold price in 2012 – the Fed minutes noted that “A number of members indicated that current and prospective economic conditions could well warrant additional policy accommodation, but they believed that any additional actions would be more effective if accompanied by enhanced communication about the Committee’s longer-run economic goals and policy framework.”

Although the Fed once again stopped short of committing to QE3, it is clear that the central bank intends to maintain its dovish stance for the foreseeable future. Furthermore, three of the most hawkish FOMC members –Fisher, Kocherlakota, and Plosser – are no longer voting members due to a rule where various Fed Presidents are required to rotate their positions on an annual basis. If economic conditions worsen, the Fed would therefore have a far easier time reigniting the printing presses – a development that would have bullish implications for the price of gold.

Gold’s 11th straight year of gains

2012-01-04T08:07:00.001+08:00

Following gold’s 11th straight year of gains, long-time gold bull Richard Russell predicted further gains for the yellow metal in 2012.

Russell discussed his latest thoughts on the yellow metal in the most recent edition of Dow Theory Letters, the world’s longest-running daily investment letter.

“To my knowledge this is the longest bull market of any kind in history in which each year’s close was above the previous year,” he wrote. “This fabulous bull market will not end with a whisper and a fizzle. I continue to believe that the upside gold crescendo of this bull market lies ahead. We are watching market history.”

Russell – who turned bullish on gold near the start of its bull market in 2001 – went on to say that “I note the frustration and anger of the anti-gold crowd. To miss 12 years of rising prices is enough to make any investor furious with himself. I would guess that 99 percent of Americans have never participated in the gold bull market. Thus, sour grapes is the sentiment of the gold-haters. Happy to say my subscribers who listened to me in the early years of the gold bull market have enjoyed the riches restored upon them by the greatest bull market in history.”

Gold has advanced 10.1% in 2011 and is set to rise for a remarkable 11 consecutive years

2011-12-31T08:46:00.002+08:00

The gold price rebounded strongly Friday, gaining $17.50 on the last trading day of the year. At $1,564 per ounce, the price of gold is still lower by $42 this week and has fallen $182 in the month of December. Despite this month’s losses, gold has advanced 10.1% in 2011 and is set to rise for a remarkable 11 consecutive years.

Hathaway discussed his latest thoughts on the gold price in a recent interview with King World News. When asked about the yellow metal’s slide in recent months, he responded that “The action is what you would expect in a thin market like this, the moves are exaggerated. The people that have shorts on, which has been the right trade for the last several months, they are just pushing it to the limit (on the downside) to make their year.”

Given these developments, Hathaway contended that the gold price is near an important nadir. “Traders commitments are indicative of a bottom, sentiment is indicative of a bottom and market action is indicative of a bottom. I’d suspect we will see a couple more scary days in terms of probing the downside, but I don’t think it’s sustainable.”

Heading into 2012, the Tocqueville fund manager stated that “I look for turbulent financial markets that will be contentious on the political front. Probably anemic economic activity and it looks to me like Europe and Japan are heading into recession. You wonder what kind of feedback that will have for the US. All of this will end up with mobs of people screaming for money printing and I think that’s going to be the flash point for gold.”

“Obviously the gold price has to make a stand at some point, but I do think we are seeing panic liquidation,” Hathaway added. “I think we’re at the point where you’re going to see central banks start dumping dollars for gold. The dollar really isn’t strong, it’s just relatively strong to the euro, but ultimately the dollar is caught up in the same mess.”

Hathaway also reiterated his bullish gold price stance on Thursday during CNBC’s Halftime Report. He stated that “I think the conditions that got gold to $1,900 this summer haven’t gone away. It’s just that the metal was overcrowded with too many momentum players, and I think they’ve all been shaken out…You have to take a look at what is it that drives money into gold. Basically, it’s negative interest rates, financial repression, lack of fiscal discipline and money printing.”

Forced to sell positions tied to the price of gold in order to cover losses in other asset classes

2011-12-30T07:43:00.003+08:00

The gold price dropped $18.86, or 1.2%, to $1534.74 per ounce Thursday morning as the U.S. dollar added to its recent gains against a basket of the world’s other leading currencies. In overnight trading the spot price of gold tumbled to $1,521.80 per ounce – its lowest level since July 6th of this year – as the dollar reached an intra-day high against the euro currency. The gold price later pared its losses after U.S. weekly jobless claims came in at 381,000 – above the 375,000 consensus estimate among economists.

Peter Boockvar, a market strategist at Miller Tabak & Co., noted in a report to clients on Wednesday that “The easier part of Italy’s bond auctions this week took place earlier today. But a good test of the appetite for Italian debt will be tomorrow’s bond sales that have maturities past three years.”

While the gold price has traditionally served as a safe haven during times of economic stress, the European sovereign debt crisis has fueled a liquidity shortage across the globe. Many financial institutions and investors have been forced to sell positions tied to the price of gold in order to cover losses in other asset classes.

In addition to the need to raise cash, VTB Capital analyst Andrey Kryuchenkov contended that the gold price “is still tightly correlated with equities markets, but also risk aversion is not at the levels we saw in early August when gold de-coupled from everything else and traded with the dollar.”

Looking ahead to the final two trading days of 2011, RBC Capital Markets’ George Gero offered a similarly cautious view on the price of gold. “The selling is the perfect storm of negative lease rates, undesirable technical analysis signs, weakness in the jewelry trade in the U.S. and India, and a stronger dollar. Until after New Years we may not see much in the way of a rally.”

Gold tumbled yesterday after concerns were raised over the sustainability of demand out of China and India

2011-12-29T08:01:00.001+08:00

Gold tumbled yesterday after concerns were raised over the sustainability of demand
out of China and India (the world’s largest consumers of gold). The Shanghai Gold
Exchange and Shanghai Futures Exchange both restricted trading on gold spot and
futures contracts in a bid to curb illegal activity in commodities. The Bombay Bullion
Association forecasts a fall in gold imports for December (as much as 50% m/m)
because of the weaker rupee.

Gold price slid $13.89, or 0.9%, to $1,594.92 per ounce Wednesday morning

2011-12-28T07:31:00.002+08:00

The gold price slid $13.89, or 0.9%, to $1,594.92 per ounce Wednesday morning amid modest declines in the broader commodities complex. Silver fell $0.42, or 1.4%, to $28.85 per ounce alongside the price of gold. Equity markets in Asia and Europe were mixed, while U.S. markets looked to open slightly lower after a worse than expected Case-Shiller housing report.

With the year drawing to a close, several Wall Street firms have recently published their gold price forecasts for 2012. One of the latest to do so was Goldman Sachs, which predicted that the price of gold will peak at $1,900 per ounce and average $1,810 per ounce in the coming year. Goldman attributed its bullish gold price outlook to further net buying by central banks and strong physical demand from investors, the ongoing negative real interest rate environment in the U.S., and continued European sovereign debt and global recessionary concerns.

In its report, the firm wrote that “Our economists’ central thesis is that US real rates will remain low given limited appetite to slow the fragile US recovery or hurt the all-important job growth in an election year. Inflation from non-domestic sources (e.g. imported oil) will also lower US real rates.”

While Goldman Sachs’s forecast was unequivocally bullish for the gold price, the firm did caution that the biggest risk for the yellow metal is further strength from the U.S. dollar. As has been the case in recent months, investors could continue to view gold as more of a commodity than a currency and treat it as a “risk-on” asset class. Nevertheless, Goldman asserted that the large majority of factors influencing the the yellow metal continue to point to higher prices in 2012.

As for gold stocks, the firm had a considerably less positive stance. Goldman noted that gold equities have substantially underperformed the gold price since 2005 due to two key reasons. First has been competition from gold exchange-traded funds (ETFs), which have provided investors with an alternative way to gain exposure to precious metals. The firm pointed out that ETFs currently hold approximately 70 million ounces of gold valued at over $115 billion. In 2011, ETFs have added 230 tonnes of gold and Goldman expects this trend to continue in 2012.

The second factor has been that many gold mining companies have experienced significant operational challenges in recent years. Goldman noted that for the companies it covers, gold grades have declined as much as 50% compared to 20 years ago, royalty and tax rates are considerably higher, and political risks have presented a severe headwind for the sector. Going forward, the firm contended that these factors are likely to remain in place as “capital intensity increases, cost inflation comes through and tax/royalty structures enacted by governments around the world extract more from the mining industry.”

Gold futures held near unchanged at $1,608 per ounce on Monday

2011-12-27T08:18:00.002+08:00

Gold futures held near unchanged at $1,608 per ounce on Monday as financial markets in North America and Europe remained closed for the Christmas holiday. Silver stabilized as well near $29.10 per ounce in thin trading. At their current levels, gold is now higher by 13.2% on a year-to-date basis, while silver is down 6.0% in 2011.

RBC Capital Markets strategist George Gero wrote in a note to clients that he expects gold prices to trade between $1,600 and $1,650 in the coming week. He contended that a daily close above $1,615 per ounce could lead to a short-covering rally for the yellow metal during the last week of the year.

Equity markets in Asia were open on Monday, as Japan’s Nikkei 225 Index advanced 1.0% to 8,479.34 on the back of Friday’s gains in U.S. markets. In contrast to Tokyo, China’s Shanghai Composite fell 0.7% to 2,190.11 and South Korea’s Kospi dropped 0.6% to 1,856.70.

Gold will be forming a bottom in the coming months

2011-12-24T10:11:00.002+08:00

The gold price oscillated above the $1,600 per ounce level Friday morning. At $1,608 per ounce, the price of gold is lower by $138 in December, a decline of 7.9%. Strength the U.S. dollar has pressured gold and investments tied to the gold price over the course of the month. Nevertheless, the yellow metal remains higher by 13% thus far in 2011 and is on pace to post its eleventh consecutive year of gains.

Looking ahead for the price of gold, VTB Capital analyst Andrey Kryuchenkov contended on Thursday that “We still see easing momentum for gold at the end of the month with small chance of physical buyers or longer-term investors returning before [the first quarter of 2012]. In the next few sessions, we expect to see some more volatility in thin pre-holiday trading.”

In a note to clients, the VTB Capital also wrote that “We still see little chance for gains here until year end. Gold will stall below short-term resistance at $1,620, in our view. The market failed to breach it yesterday, also having tested more resistance at $1,640 (earlier in the week).”

Eugen Weinberg, an analyst at Commerzbank, offered a similarly cautious near-term outlook on the gold price. ”People are not looking at gold as a safe haven, and that is one of the reasons for this lacklustre performance. I wouldn’t be surprised to see further weakness in gold prices going forward.”

Over the longer-term, however, Weinberg presented his more bullish stance on the price of gold. ”The price increase before was also due to speculative interest, and that seems to be abating, which I find healthy. Gold will be forming a bottom in the coming months, and due to the higher risks ahead, I think prices are likely to increase.”

Physical demand from China (ahead of January 23 New Year) and year end-related buying from India which is providing support to the gold price

2011-12-23T07:52:00.004+08:00

The gold price dipped $8.07 to $1,608.82 per ounce Thursday after U.S. weekly jobless claims fell to 364,000, their lowest level since April 2008. The modest decline in the gold price coincided with a firmer U.S. dollar, which rose fractionally against a basket of foreign currencies.

Jonathan Loynes, Chief European Economist at Capital Markets, wrote in a note to clients that “While this might help to address recent signs of renewed tensions in credit markets and support bank lending, we remain skeptical of the idea that the operation will ease the sovereign debt crisis too.”

Gold shares stabilized near the flatline alongside the gold price on Wednesday, with the AMEX Gold Bugs Index (HUI) closing lower by just 0.1% at 513.56. Notable decliners in the sector included Gold Fields (GFI) and Kinross Gold (KGC), which slid 1.0% and 0.5%, respectively. In contrast, Barrick Gold (ABX) advanced 0.4% to $46.28 per share and Newmont Mining (NEM) rose 0.4% to $62.88 per share.

With the gold price relinquishing most of its gains yesterday, the Gold is now lower by 7.4% this month. Looking ahead to the remainder of the year, Scotia Mocatta analyst Simon Weeks forecasted that “Despite on-going physical demand from China (ahead of January 23 New Year) and year end-related buying from India which is providing support to the gold price,” he remains cautious on the Gold.

Weeks attributed his stance to gold’s current bearish condition from a technical perspective, along with redemptions from ETFs and “headline risk in thin market conditions.” He predicted that the $1,600 per ounce level “will likely act as a magnet” as 2011 draws to a close.

Morgan Stanley forecasted the gold will reach $2,200 per ounce in 2012

2011-12-22T13:45:00.003+08:00

The gold price traded near unchanged Wednesday, oscillating around the $1,615 per ounce level. Gold prices surged as high as $1,641 per ounce overnight before backing off heading into the opening bell on Wall Street. News that the European Central Bank awarded $645 billion in three year loans, the highest total ever for a single operation, propelled gold higher in the overnight session.

While Morgan Stanley highlighted that the chorus of those calling for the end of the gold bull market has risen substantially of late, it believes such calls are misguided. “While seasonal and non-gold market factors have undoubtedly played an important role in the two corrective waves of selling since September 2011, the unusual phenomenon of negative gold lease rates and falling gold prices points to other factors at work in the gold market,” the firm wrote. “We conclude that these probably relate to bank funding stress.”

Although Morgan Stanley expects such stresses to continue in 2012, it asserted that “Recent coordinated actions by six central banks, and separate actions by the ECB, suggest that non-gold-related measures to ease access to US dollar swaps will gradually ease the downside pressure on the gold price.” Furthermore, the firm predicted that the “corrective phase” in the gold price will end “when the Federal Reserve adopts a new round of quantitative easing in the H1 2012, weakening the US dollar and reigniting the safe haven trade for gold that is likely to see a renewed and successful challenge to the September 2011 high.”

As for a specific gold price target, Morgan Stanley forecasted the gold will reach $2,200 per ounce in 2012. The firm reiterated that its outlook is based on the Fed implementing QE3, which will create “the makings of a renewed upward assault on the recent all-time high” in the price of gold.

Nearly half predicted that the gold price will fall to $1,450 per ounce in the first quarter of 2012

2011-12-21T07:41:00.002+08:00

The gold price climbed $18.19, or 1.1%, to $1,610.87 per ounce Tuesday closing as the U.S. dollar declined against a basket of the world’s leading currencies. Silver advanced alongside the the price of gold by $0.57, or 2.0%, to $29.36 per ounce, as the commodities complex was bolstered by the weaker dollar.

With the current year winding down, Reuters polled 20 hedge fund managers, traders, and economists on their outlook for the price of gold in 2012. Given the considerable sell-off in recent months, it was not surprising that most respondents were quite cautious on the yellow metal’s prospects for next year. Nearly half predicted that the gold price will fall to $1,450 per ounce in the first quarter of 2012, and that gold is unlikely to reach a new all-time high until at least the third quarter.

Reuters cited “a lack of immediate monetary easing or stimulus programs by central banks” as the primary reason respondents were bearish on gold’s prospects in 2012. Jeffrey Sherman, commodities portfolio manager at DoubleLine Capital, commented that “To me, gold is not attractive right now because we don’t see any inflation threats.”

The gloomy outlook of the Reuters poll echoed other recent measures of gold sentiment, including MarketVane’s Bullish Consensus reading. At 58%, the MarketVane report came in at its lowest level since December 2008, immediately after the depths of the financial crisis. Last week the Hulbert Gold Newsletter Sentiment Index (HGNSI) reached 0.3%, indicating that “the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market,” according to HGNSI founder Mark Hulbert.

While the sentiment data reflects investors’ somber mood toward gold, a contrarian perspective indicates that now is far from the time to be turning bearish on the gold price. Throughout the 11-year bull market in gold, extremely low sentiment levels – as witnessed currently – have been associated with intermediate-term bottoms in the price of the yellow metal. Although it is quite difficult for investors to pick the exact bottom in the gold price, the data suggests that the risk-return setup for gold has become quite favorable at the present time.

Gold Price Hovers Near $1,600 After Last Week’s “Beating”

2011-12-20T07:37:00.003+08:00

The gold price stabilized near $1,600 per ounce Tuesday morning as the euro currency traded near unchanged against the U.S. dollar. The spot price of gold fell to as low as $1,584.90 per ounce in overnight trading, but later climbed to $1,610.30 as the euro recovered from earlier losses against the greenback. Growing political uncertainty in North Korea also helped to support the gold price, after the nation announced that leader Kim Jong-il passed away due to a heart attack. Asian markets tumbled after his death was reported, but European markets bounced back alongside the euro currency and S&P 500 futures rose 0.4% to 1,216.25.

As investors continued to fret over the effectiveness of European officials’ efforts to combat the debt crisis, the euro plummeted to fresh 11-month lows against the U.S. dollar. The currency cross fell from 1.3370 at the beginning of the week to as low as 1.2945 last Thursday, before bouncing modestly back above the 1.30 level. The U.S. dollar also climbed against the British pound and Japanese yen, as the need to raise cash fueled increasing demand for the world’s reserve currency.

Commenting on the implications for the gold price of the currency markets’ movements, strategists at Deutsche Bank wrote in a note to clients that “Over the past three months, the correlation of gold to euro/dollar has risen to over 50%. This is likely to have occurred as U.S. dollar strength is no longer being accompanied by inflows into physically backed gold exchange-traded funds.”

On Friday, Credit Agricole analyst Robin Bhar noted that “Gold took a beating this week and today bounced a bit as investors see this as a good moment to buy, but it is still vulnerable. I expect gold will stay under pressure as the funding stress is increasing the need for liquidity, and gold is seen as one of the assets to liquidate.”

Saxo Bank senior manager Ole Hansen took a similar cautious stance toward the gold price, contending that “At the moment a lot people are resting their hopes on the fact that physical demand will pull gold back up again, but because of the amount of speculative investment that has gone into this market over the last years, it is obviously exposed on that basis. Gold has received a lot of new followers over the last few years because of its long-term trend, and if we should see a failure to recover, investors might say, ‘Look I lost a lot of money and I don’t dare to try once again’, so it very much depends on what prices will do over the next couple of weeks.”

With the holiday season approaching, the price of gold and other financial assets may begin to consolidate following several weeks of heightened volatility. However, the ongoing turmoil in Europe is likely to remain a critical factor for the markets. In addition, this coming week’s U.S. economic calendar is filled with several key reports. Existing home sales for November are due out Wednesday morning, along with November new home sales on Friday. Thursday’s schedule contains a plethora of data points – including weekly jobless claims, leading indicators for November, University of Michigan Consumer Sentiment for December, durable goods for November, and third quarter GDP. Fed Chairman Ben Bernanke and his fellow central bankers will undoubtedly be paying close attention to these reports as they continue to monitor the economic landscape heading into 2012.

Kim's death - there had been some fear among North Korean

2011-12-19T13:13:00.002+08:00

Kim's death was announced on Monday by the state television from the North Korean capital, Pyongyang.

Kim is believed to have suffered a stroke in 2008 but he had appeared relatively vigorous in photos and video from recent trips to China and Russia and in numerous trips around the country carefully documented by state media. The communist country's "Dear Leader" - reputed to have had a taste for cigars, cognac and gourmet cuisine - was believed to have had diabetes and heart disease.

The news came as North Korea prepared for a hereditary succession. Kim Jong Il inherited power after his father, revered North Korean founder Kim Il Sung, died in 1994. In September 2010, Kim Jong Il unveiled his third son, the twenty-something Kim Jong Un, as his successor, putting him in high-ranking posts.

Kim Jong Il had been groomed for 20 years to lead the communist nation founded by his guerrilla fighter-turned-politician father and built according to the principle of "juche," or self-reliance.

Even with a successor, there had been some fear among North Korean observers of a behind-the-scenes power struggle or nuclear instability upon the elder Kim's death.

Bargain hunters stepped in to take advantage of the $176 correction in the price of gold

2011-12-17T08:47:00.003+08:00

The gold price climbed $25.20 to $1,592 per ounce after trading as high as $1601 per ounce early Friday morning. Bargain hunters stepped in to take advantage of the $176 correction in the price of gold that has occurred in the month of December. Weakness in the U.S. dollar against the euro helped boost precious metals and the rest of the commodities complex. Silver advanced nearly 2% to $29.74 per ounce while copper climbed 2.7% to $3.35 per pound.

While the price of gold moved lower on Thursday, silver snapped a three-day losing skid by rebounding modestly. The spot price of silver advanced $0.14, or 0.5%, to $29.06 per ounce. Gold’s sister precious metal had reached an intra-day high of $29.38, but pared its gains as the U.S. dollar bounced back against the euro currency. The euro still managed to climb against the greenback, however, but by only 0.3% to 1.3020.

Weakness in the gold price continued to pressure shares of gold mining companies, as the AMEX Gold Bugs Index (HUI) slid 1.5% to 501.40. In doing so, the HUI – comprised of the world’s largest gold producers – reached its lowest closing level since June 27th of this year. Agnico-Eagle Mines (AEM) and Harmony Gold (HMY) were two of the sector worst performers yesterday, with declines of 4.8% and 4.9%, respectively. Newmont Mining (NEM) was one of the only gold stocks to finish in positive territory, albeit by just 0.2% at $61.76 per share. Gold mining stocks rose across the board early Friday on strength in the gold price and buoyant global equity prices.

Gold price sell-off was fueled not only by further sovereign debt fears in Europe, but also by the aftermath of the Federal Reserve’s latest monetary

2011-12-16T07:44:00.002+08:00

The gold price rose $13.40, or 0.9%, to $1,585.68 per ounce Thursday morning as financial markets bounced back from yesterday’s broad-based sell-off. The price of gold rebounded modestly as the euro currency snapped a three-day losing skid against the U.S. dollar. Equity markets in the U.S. were set to open considerably higher as well, with the S&P 500 futures contract up 1.0% at 1,218.75.

Strength in the U.S. dollar also helped to pressure the gold price, as the greenback reached its highest level since January 12, 2011 against a basket of the world’s largest currencies. The euro concurrently dropped to a fresh 11-month low of 1.2982 against the dollar after the head of Germany’s central bank, Jens Weidmann, cautioned that the euro zone will not implement a quantitative easing program to combat the debt crisis. At a speech in Berlin, Weidmann stated that “One idea must finally be put aside, that of getting the needed money from the printing press.”

Wednesday’s gold price sell-off was fueled not only by further sovereign debt fears in Europe, but also by the aftermath of the Federal Reserve’s latest monetary policy meeting. HSBC analyst James Steel wrote in a note to clients that the Fed’s decision to not implement or even discuss the potential for a third round of quantitative easing (QE3) in the FOMC statement created a considerable headwind for the price of gold.

“Additionally, some macro hedge funds are liquidating gold holdings and taking profits in a difficult year,” Steel contended. “As trading volume typically drops toward year-end, we expect increasingly volatile price swings. Potential gold buyers may be reluctant to come forward as the year draws to a close. Gold could easily slide through the holidays.”

Perhaps most importantly for the gold price, it fell decisively below its 150 day moving average (DMA) for the first time since January of 2009. On nine occasions over the past 25 months, the price of gold tested and successfully held this level. Gary Kaltbaum, a Minyanville.com contributor, argued that this unsuccessful test is a significant bearish sign for gold.

“If it cannot get back above (the 150 DMA) within the next week, I would consider it a major breakdown of consequence,” Kaltbaum stated. “Very simply, the longer a trend lasts, the more the break is of importance. Also of importance, the 200 day moving average is just below at $157 in GLD. A break below there and we are talking the first bear market in gold since the bear of 08.”

Gold is due for a strong rally.

2011-12-15T07:49:00.001+08:00

With gold futures tumbling to fresh multi-month lows on Wednesday, price is not the only aspect of the yellow metal that has come under significant pressure in recent weeks. Gold sentiment has declined to extremely low levels, so much so that noted market pundit Mark Hulbert wrote this morning that “gold bugs are throwing in the towel.”

Hulbert noted that the Hulbert Gold Newsletter Sentiment Index (HGNSI) – one of the most closely-followed measures of the investment community’s stance toward gold – reached 0.3%. This level “means that the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market,” he wrote.

Although Hulbert acknowledged that the gold price proceeded to tumble over $100 in the past week – at which time the HGNSI was already at a very low reading of 13.4% – he noted that “at the 95% confidence level that statisticians often use to determine if a pattern is genuine, gold bullion tends to do better following low HGNSI levels than high ones.”

Based on these statistics, Hulbert contended that from a contrarian perspective, “a very strong wall of worry” is “forming in the gold market, one which could very well be the springboard for bullion rallying into new all-time high territory.”

“There’s another reason to expect bullion to soon begin rallying: The end-of-year period historically has been a strong one for gold,” Hulbert added. ”Indeed, Ned Davis senior equity analyst John LaForge told me that the bulk of gold’s return over the last decade has been produced in the last several weeks of the calendar year.”

Hulbert concluded by saying that “We haven’t seen any such seasonal strength this year, needless to say. But gold’s seasonal tendencies are yet more evidence pointing in the same direction as contrarian analysis: Gold is due for a strong rally.”

Gold price has been under pressure due to a stronger U.S. dollar and broad-based selling in financial markets

2011-12-14T07:46:00.002+08:00

The gold price traded lower at $1,625 per ounce Wednesday. After breaking below $1,700 per ounce yesterday, gold prices failed to mount a rally this morning. The gold price has been under pressure due to a stronger U.S. dollar and broad-based selling in financial markets – plummeting $44.86, or 2.6%, during Monday’s session. With its decline, the spot price of gold dropped to its lowest level in seven weeks and extended its loss in December to 4.5%.

As for the gold price, Dennis Gartman – long-time commodities investor and author of The Gartman Letter – wrote on Monday that “We shall continue to reduce our exposure to gold and we had hoped to increase our exposure to equities, moving eventually to balance this position, holding equal sums of gold and equities while being short of the EUR.”

However, Gartman noted that with the recent uptrend in the euro-denominated price of gold breaking with yesterday’s sell-off, he sold his entire position in the gold. Although he acknowledged that he would consider buying back investments tied to the gold price in the future, Gartman did not provide a time frame or a particular level at which such purchases would be made.

While Gartman effectively sounded the alarm on the gold market – at least in the short-term – UBS analyst Peter Lee presented a more neutral stance. In a note to clients, Lee forecasted that the gold price is likely to stabilize in a trading range between $1,600 and $1,750 per ounce for the remainder of the year. Subsequently, Lee predicted the gold price will resume its rally. “We continue to favor gold over other commodities as geopolitical and economic uncertainties persist,” Lee wrote. “Since the prevailing primary trend is up we expect gold will resume its uptrend and retest its $1,923 all-time high.”

Investor do not believe gold’s long-term upwards trend to be under threat

2011-12-13T08:00:00.002+08:00

The gold price plunged Monday morning, sliding $39.65 to $1,672 per ounce. Investors shed long gold positions and investments tied to the gold price amid heightened worries that the continued refusal of the European Central Bank (ECB) to more aggressively aid Italy and Spain will lead to a fresh deflation episode. S&P 500 stock futures fell 13.30 to 1239.70 while oil sank $1.28 to $98.12 per barrel.

Despite gold’s muted initial reaction to the outcome of the December 9 meeting of 27 European leaders, the yellow metal is facing heavy selling in the aftermath of the latest European summit. Officials were unable to achieve unanimous support for a new agreement on tighter fiscal regulations, although the group said it would pursue an intergovernmental treaty with the majority of member nations. In addition, the European nations agreed to provide the International Monetary Fund (IMF) with up to €200 billion in bilateral loans that could be utilized to provide financial support to fiscally strapped nations such as Portugal, Spain, and Italy.

David Mackie, a J.P. Morgan economist in London, commented that “It’s not the grand bargain some people had been hoping for. A door has been opened with the IMF channel, but some people may say that 200 billion euros is simply not enough.”

As for the impact on the gold price, analysts at Commerzbank argued in a note to clients that the lack of financial firepower emanating from the EU summit could present a headwind for the yellow metal in the shorter-term. Gold’s “latest relative weakness can be expected to prompt investors – who recently took a positive view of gold – to continue shedding their positions,” the firm wrote. “A possible price slide below $1,700 may thus accelerate a further slump.” However, Commerzbank also contended that “Despite these short-term tendencies, we do not believe gold’s long-term upwards trend to be under threat.”

Survey of Gold Traders Most Bullish Since Early November

2011-12-11T08:47:00.000+08:00

A weekly survey of gold traders showed that market participants have turned noticeably more positive on the Gold of late.

In Bloomberg's latest weekly gold survey, 18 of 26 respondents said they expect gold prices to rise next week. This marked the highest bullish response since November 11. Two traders predicted the yellow metal will decline, while the remaining 6 were neutral.

The report attributed to the positive outlook on gold to escalating sovereign debt concerns in Europe, coupled with several other macroeconomic factors. ”Central banks are adding to their gold reserves for the first time in a generation. South Korea said last week it bought 15 tons in November to diversify its foreign-exchange reserves. The World Gold Council expects central banks to buy as much as 450 tons this year. Official holdings stand at 30,708 tons, data from the council show.”

Gold prices succumbed to broad-based selling pressure

2011-12-10T08:40:00.003+08:00

Gold price, at $1,712 per ounce, hovered near unchanged to end this week. After moving as high as $1,724 per ounce early morning, gold prices succumbed to broad-based selling pressure. European leaders announced a verbal commitment to pursue a tighter fiscal union, but as has been the case in the past, details were sparse. Of greater importance to financial markets was European Central Bank President Mario Draghi’s continued insistence that the ECB will not be used to fund fiscal deficits on its member nations.

The gold price was also pressured by a rally in the U.S. dollar, which advanced 0.6% against a basket of foreign currencies. The euro slid 0.5% to 1.3349 against the greenback, fueling widespread weakness in the commodities complex. In precious metals, silver dropped 3.0% to $31.62 per ounce and platinum slid 2.2% to $1,493.50 per ounce. The cyclically-sensitive copper price fell 1.7% to $3.50 per pound, and crude oil retreated 2.2% to $98.25 per barrel.

The primary catalyst for yesterday’s sell-off in the price of gold and broader markets was Draghi’s response to a question during the press conference following the ECB’s monthly monetary policy meeting. When asked about the possible expansion of the central bank’s bond-buying program, the ECB President shot down the idea, noting that the European Union treaty prevents “monetary financing” from occurring.

Peter Boockvar, equity strategist at Miller Tabak, wrote in a note to clients that “It’s this one headline that has the market lower…While so many want him (Draghi) to print, he doesn’t want to give EU (European Union) countries a free pass. It’s called tough love.” Boockvar went on to say that “I repeat again, the sustainability of this stock market rally comes down to money printing or not.”

Commenting on the implications of Draghi’s comments for the gold price, Jeffrey Sherman – commodities portfolio manager at DoubleLine Capital, noted that “If the ECB can’t figure out a way to provide liquidity, that creates deflation fears. If deflation takes hold, gold is not an attractive asset.”

Gold has oscillated between gains and losses as investors await Friday’s European Summit

2011-12-09T08:52:00.002+08:00

Although the gold price headed north on Thursday, it remains close to the mid-point of the $1,600-$1,900 per ounce trading range it has occupied for the past several months. This week the price of gold has oscillated between gains and losses as investors await Friday’s European Summit, where policymakers are expected to present a more formidable plan for dealing with the euro zone sovereign debt crisis.

Daniel Smith, an analyst with Standard Chartered, wrote in a note to clients yesterday that “Such a big unknown event risk is making people quite cautious and, heading into year-end as well, no one really wants to take any positions and it adds to that lack of interest in the market… My assumption would be that the summit would end up being slightly disappointing and therefore, base metals will do relatively badly and gold will do relatively well on the back of fresh safe-haven flows.”

Another downgrade warning from Standard & Poor’s also helped support the gold price on Wednesday, as the ratings agency placed the European Union’s AAA credit rating on CreditWatch with negative implications. The move indicated a 50% probability of a downgrade over the next three months.

In its report, Standard & Poor’s noted that “The CreditWatch on the E.U. is an expression of our concerns about the potential impact on the future debt service capacity of eurozone sovereigns, and therefore also the E.U., in the context of what we view as deepening political, financial, and monetary problems within the euro zone.”

Further turmoil for the global financial system and a continued favorable environment for the price of gold

2011-12-08T07:46:00.002+08:00

The gold price rallied Wednesday on rumors that the European Central Bank will announce a series of new measures to stimulate the stagnant European economy. Gold prices climbed $5.25 to $1,735 per ounce as various news outlets reported that the ECB is considering loosening collateral requirements for banking institutions. Further monetary accommodation by the ECB would likely support the gold price – as well as the broader stock and commodity markets.

Commenting on the gold price in light of the ongoing uncertainty in Europe, UBS precious metals analyst Edel Tully wrote in a report to clients that “Price sensitivity to headlines will persist, if not intensify, and make for jerky market moves…Given the significant event risk, some investors may choose to wait for the picture to clear before taking positions of size, so thin liquidity will also be a potential feature.”

Richard Russell offered a more bullish stance on the price of gold in a recent edition of Dow Theory Letters, the world’s longest-running daily investment letter. He wrote that “The stock market continues to rise on the basis of negative interest rates that are manipulated by the Fed with high hopes that Europe will do what is needed to keep the Euro alive. In this situation Germany’s Angela Merkel has become the Euro fan, which will go a long way to giving life to the Euro.”

“The overriding problem in Europe and the US are debts far beyond anybody’s power to pay off,” added Russell, who turned bullish on the gold price near the start of its bull market in 2001. “So it’s a question of who takes the hair cut and how short the hair will be when the barbers are finished.”

Looking ahead, Russell predicted further turmoil for the global financial system and a continued favorable environment for the price of gold. “The massive amounts of capital that have been thrust into the system by the federal banks will give way to inflation somewhere in the future — probably within the next three years. With it will come higher interest rates and this will finish with the happy times of today. When trillions of dollars of debt have to be rolled over at rising rates the garbage will hit the fan and hit it hard. In the mean time our best method of survival and retaining power will be gold.”

Summit contains considerable uncertainty for the price of gold

2011-12-07T07:41:00.003+08:00

The gold price moved lower Tuesday, trading off $17.00 at $1,706 per ounce before bound back to $1,722. Analysts at Canadian-based Stifel Nicolaus noted that “Physical demand is slowing ahead of Euro summit.” All eyes continue to be on Europe and the summit set to take place on December 9 among European leaders. S&P 500 stock futures traded near unchanged at 1255.60 while the price of gold and broader commodities complex were lower across the board. Oil and copper fell 0.4% and 2.2% to $100.58 per barrel and $3.53 per pound, respectively.

While Standard & Poor’s warning rattled the gold price and gold equities, the ratings agency later placed all 17 nations in the euro zone on “credit watch negative” – representing a 50% chance of a downgrade within the next 90 days. The move came despite an encouraging meeting between French President Nicolas Sarkozy and German Chancellor Angela Merkel. The top officials in France and Germany agreed on a proposal to implement amendments to Europe’s governing treaties to provide stricter economic governance for the entire euro zone. The proposal is expected to be presented to the entire European Union at a summit in Brussels on Friday.

Commenting on the implications of the euro zone developments for the gold price, analysts at Commerzbank wrote in a note to clients that “Friday’s European Union summit is the most important meeting over the next few days, though we can expect a long wait before a permanent solution to the crisis is found.”

While the summit contains considerable uncertainty for the price of gold, according to Commerzbank, the firm contended that Thursday’s European Central Bank (ECB) meeting is likely to be a bullish factor for the gold price. The consensus view among economists is for the ECB to lower its benchmark interest rates by 25 basis points to 1.0%. “This should lend support to the gold price since the opportunity costs of holding gold will remain low,” Commerzbank stated. “That said, speculative financial investors are still showing reticence and for the second week running moderately cut their net long positions in the week to Nov. 29.”

In the U.S., Chicago Fed President Charles Evans stressed the need for additional stimulus in a speech on Monday. “There is simply too much at stake for us to be excessively complacent while the economy is in such dire shape,” Evans argued. “It is imperative to undertake action now.”

Last month Evans expressed concerns that Europe’s sovereign debt issues could have significant spillover effects on the U.S. economy. By reiterating his ultra-dovish outlook yesterday, Evans indicated that the crisis has escalated further in recent weeks and therefore warrants further accommodative monetary policies – measures that could provide further support for gold prices.

George Soros - evidently feels the gold has yet to reach bubble territory

2011-12-06T07:43:00.002+08:00

The gold price retreated Monday, sliding $8.65 to $1,733.95 per ounce. Gold prices sank while stocks and commodities posted strong gains. S&P 500 stock futures climbed 17.00 to 1,260.50 while crude oil, copper, and soybeans all moved to the upside. Optimism that Italian Prime Minister Mario Monti’s proposed budget cuts will help stabilize the nation’s bond market helped power the broad-based rally. The yield on 10-year Italian sovereign debt fell to 6.1%.

George Soros, who famously called gold “the ultimate bubble” several years ago, evidently feels the gold has yet to reach bubble territory.

The legendary investor – famous for founding the Quantum Fund in the 1970s and for shorting the British pound in the early 1990s – invested $40 million in the $2.8 billion IPO of Chow Tai Fook Jewellery Group Ltd, according to a report from Forbes.

Chow Tai Fook Jewellery Group Ltd is expected to list on the Hong Kong Stock Exchange on December 15, where it plans to sell 1.05 billion common equity shares, or 10.5% of the Company. Chow Tai Fook generated revenue of $4.5 billion in the 12 months ending March 31, 2011, according to the report – considerably more than Tiffany’s $3.09 billion over the same time frame.

The report noted that “Beyond showing he still believes in the yellow metal, Soros’ investment in Chow Tai Fook highlights the strength of Chinese gold demand. China is not only the world’s top gold producer, with yearly output of 340.9 tons in 2010, but one of the largest importers, with investors bringing in 60.2 tons in the third quarter of 2010 alone, according to the World Gold Council.”

“Official purchases by China’s central bank have continued through the years, but China’s holdings remain proportionally small,” Forbes added. ”China’s reserves total 1,054.1 tons according to the World Gold Council; the U.S., which counts with the world’s largest gold reserves, holds about 8,133.5 tons. Even more interestingly, China’s gold reserves represent only 1.6% of its total foreign exchange reserves, compared with the world average of 11% and the U.S.’s 74%. China will surely be a buyer of gold in years to come.”

Gold likely to rally into New Year 2012

2011-12-05T08:39:00.002+08:00

Looking forward to 2012 it looks as though we are going to see some major changes unfold globally that will change the way we do things live our lives. Unfortunately its a very negative outlook but I do have hope that something will be done to perserve are somewhat normal lifestyles. I’m not one to talk doom and gloom, there are enough of those guys out there already so lets stick with the charts and focus on what is unfolding now in the present and how to take advantage of it…

Here is my positive out look for gold and what I feel is likely to unfold near term. If the dollar continues its rally and breaks out it could actually put some pressure on gold. I know gold is a safe haven so I do expect it to hold up, but a strong dollar will neutralize a lot of the buying in gold in my opinion.

Base on the chart and history, Gold likely to rally into New Year 2012

Malaysia Retail Gold Price Still Hold On RM197/g

2011-12-05T07:58:00.002+08:00

After a week of price up down, retail gold price in Malaysia did not change, still hold on RM197/g for 916 Gold.

This week will see Euro and US to simulate the market with any plan and all the plan near more money flow into market so money will be print, share will go high as windows dressing and food price will fly sky high.

China’s efforts to encourage gold investment among its citizens have been particularly successful

2011-12-04T08:52:00.000+08:00

China’s efforts to encourage gold investment among its citizens have been particularly successful over the past year.

Data from the Hong Kong government showed that China mainland imported approximately 140 tonnes of gold via Hong Kong between July and September 2011, above the 120 tonnes imported during the entire year of 2010, according to a report by Mineweb. Furthermore, the data revealed that gold purchases in China via Hong Kong reached a record 56.9 tonnes in the month of September, a 600% increase on a year-over-year basis.

The report also noted that “China has been encouraging its citizens to buy and hold physical gold, either in the form of jewellery, coins or bars. The Asian country also had widened the number of banks allowed to import gold and has been encouraging more gold investment through new exchanges and yuan denominated products. On June 28, China opened its first precious metals spot exchange.”

Additional highlights from the report include:

“China’s aggressive promotion has pushed Chinese consumer demand for gold up 25% overall this year – much higher than the 7% global average. This is a far cry from the position in 2002, before which Chinese citizens were barred from owning physical gold under penalty of imprisonment.”

“That policy was dropped and the Shanghai Gold Exchange came into being. In mid October, a new Renminbi kilobar gold was launched, the world’s first offshore yuan denominated spot gold contract. It started trading on Hong Kong’s Chinese Gold and Silver Exchange.”

“Taking this a step further, the Ministry of Industry and Information Technology in China has plans to reform the gold sector in China by eliminating smaller gold smelters. The Ministry also has said it will support international gold prices in the long run. At a national gold industry meeting on November 28, the Ministry said it planned to shut down certain gold producers with smaller ore processing capacities.”

“In a major turnaround and for some time now, the government also has been airing news programmes on state owned television urging consumers to buy and sell gold and silver. Moreover, analysts say when China expressed its interest in purchasing $80 billion in gold (about 2600 tonnes), it profoundly altered the gold market’s long standing synergy.”

“Analysts have said the country also has mounted an aggressive defense of its domestic gold mining industry. Its country’s rising middle class and growing affluence will ensure that China’s gold jewellery market nearly doubles to 955.2 tonnes by 2020, as compared with 519.6 tonnes in 2011, analysts added.”

Gold - extended its gains to $1,758 per ounce after the release of the November non-farm payrolls data

2011-12-03T08:45:00.002+08:00

The gold price added to its gains Friday following the latest U.S. jobs data. The price of gold was modestly higher prior to the report, but extended its gains to $1,758 per ounce after the release of the November non-farm payrolls data. At 120,000, the report came in slightly below the 125,000 consensus estimate among economists. However, the October and September reports were revised higher by a combined 72,000, and the unemployment rate dropped from 9.0% to 8.6% – its lowest level since March 2009. U.S. equity market futures climbed in addition to the gold price following the jobs report , with the S&P 500 contract up 1.3% at 1,259.90.

Gold shares held steady in concert with the price of gold, as the AMEX Gold Bugs Index (HUI) closed lower by 0.10 points at 584.68. Barrick Gold (ABX) and Goldcorp (GG), the sector’s two largest components, fell 0.1% and 0.3%, respectively. One notable gold producer moving higher was IAMGOLD(IAG), which advanced 1.1% to $20.41 per share after Credit Suisse initiated coverage on the Company with an Outperform rating and $25.00 target price.

The broader U.S. equity markets consolidated their gains from Wednesday as well, with the Dow Jones Industrial and S&P 500 Index closing lower by just 0.2% and 0.1%, respectively. The markets’ stability coincided with a mixed bag of economic data on Thursday. While weekly jobless claims of 402,000 missed the 393,000 consensus estimate among economists, the November ISM Manufacturing Index of 52.7% beat the 52.0% level expected.

Commenting on the outlook for the gold price in light of this week’s central bank intervention, UBS precious metals analyst Edel Tully wrote in a note to clients that “There is a twofold impact on gold from the joint policy response from central banks. First, a substantial increase in the demand for dollar swap facilities would mean further expansion of the Fed’s balance sheet, if lending is not sterilised, and would effectively be another form of easing. The downward pressure this puts on the dollar is clearly to gold’s benefit.”

“Second, to the extent that the cheapening of dollar funding costs limits the possibility of a liquidity crunch, it is also beneficial for gold,” Tully added. “We only need to look back to 2008 for a reminder that a dollar funding crisis is not gold’s friend.”

Non-farm payrolls data misses expectations the gold price would likely stand to benefit

2011-12-02T08:06:00.003+08:00

The gold price held steady Thursday, trading up $1.90 at $1,748 per ounce. Gold prices showed a muted response to the news that jobless claims climbed by 6,000 to 402,000 – a figure slightly worse than market expectations. The gold climbed $31.15, or 1.8%, yesterday after the world’s leading central banks announced coordinated liquidity measures to aid the European financial system. In doing so, the gold price finished the month of November higher by 1.9% and extended its gain in 2011 to 22.9%.

Central banks from across the globe – including the Federal Reserve, Bank of England, Bank of Japan, and others – agreed to lower the cost of liquidity swaps in order to provide the European banking system with easier access to U.S. dollars. Many banks in Europe have been hit particularly hard by the sovereign debt crisis, and these measures were intended to “ease strains in financial markets,” according to a joint statement by the central banks. The enhanced liquidity measures indicated central bankers’ continued resolve to fighting deflation – a particularly bullish factor for the gold price.

Yesterday afternoon the Fed’s Beige Book revealed that U.S. economic activity increased at a “slow to moderate pace” over the past month. Although consumer spending “rose modestly,” the residential and commercial real estate markets remained weak. Furthermore, the employment market continued to be challenged as “hiring was generally subdued.”

Looking ahead, central bankers and investors will each likely be paying close attention to Friday’s U.S. non-farm payrolls report. While Wednesday’s ADP employment report came in at 206,000 – well above the consensus estimate among economists of 130,000 – the non-farm payrolls data and unemployment report have historically been more significant data points for the financial markets. Although the gold price was able to shrug off the better than expected ADP figure, encouraging data on Friday could present a headwind for the gold. Alternatively, if the non-farm payrolls data misses expectations the gold price would likely stand to benefit.

Gold price spiked higher Thursday morning following the news that the Federal Reserve cut the cost of emergency dollar funding for European banks

2011-12-01T08:11:00.001+08:00

The gold price spiked higher Thursday morning following the news that the Federal Reserve cut the cost of emergency dollar funding for European banks. Gold prices climbed $25.75 to $1,748 per ounce amid a coordinated effort on the part of the world’s central banks to make dollars more easily available. The Federal Reserve, in conjunction with the European Central Bank, Bank of England, Bank of Japan, Bank of Canada, and Swiss National Bank is seeking to boost liquidity and calm fears that the sovereign debt crisis is morphing into a 2008-style financial collapse. S&P 500 stock futures climbed 34.30 to 1230.80 and oil prices moved back above $100 to $101.32 per barrel.

Analysts at Nomura later wrote in a note to clients that Yellen’s comments suggested the Bernanke-led Federal Reserve is likely to expand its set of accommodative monetary policies in the coming months. The firm cautioned, however, that it does not expect the Fed to launch QE3 at the upcoming FOMC meeting on December 13. However, Nomura did contend that “The sense of urgency in her comments suggests that a further deterioration of the sovereign debt crisis in Europe or the potential near-term tightening of fiscal policy in the U.S. could magnify the downside risks enough for the FOMC to advance the timetable for further easing…Her reiteration of concerns about ‘high levels of unemployment and underemployment’ suggest also that a further deterioration of the labor market might prompt action.”

Although Nomura did not discuss the implications of Yellen’s policy suggestions on the gold price, history indicates that they are quite positive for the yellow metal. The inherent currency debasement derived from money printing would likely continue to be bullish for the price of gold. Furthermore, there is a declining marginal utility associated with the creation of each additional dollar of fiat currency. Therefore, the Fed would need a larger quantitative easing program to generate the same amount of stimulus stemming from QE2. This fact is not lost on the price of gold, which alternatively has continued to rise on a more exponential basis each time the Fed has fired up the printing press.

Gold price held steady near $1,719 per ounce

2011-11-30T07:49:00.002+08:00

The gold price held steady near $1,719 per ounce Wednesday morning as the gold consolidated following yesterday’s rally. The price of gold oscillated between gains and losses in overnight trading as it mirrored the general path of the euro/U.S. dollar currency cross. The euro traded near unchanged against the greenback at 1.3319 this morning, while European equity markets were mixed. U.S. markets looked to open moderately in the black, with S&P 500 futures up 0.4% at 1,195.25.

Commenting on the outlook for the gold price, J.P. Morgan metals strategist Michael Jansen wrote in a note to clients on Monday that “In as much as broader financial deleveraging is continuing to pressure the gold price the reality is that the retail sector is a strong buyer on dips as judged by the move towards record levels on length in the ETF sector, now above the 2350mt mark.”

“Gold’s next level of main resistance is in the $1730 – $1770 area,” Jansen added. “We remain friendly basis the ongoing instability both in the US and Europe around sovereign finances but note that gold continues to be a victim of the broader USD squeeze that has seen the USD rally to around 80 on the DXY index after spending the majority of this year bumping around in the 72-75 trading range. There is some secondary US home sales data out today (expected at 315k for the month of October, a fractional increase from September) and the key focus will be on headlines and sentiment as it pertains for the direction of EU and ECB policy in the next two weeks.”

Jansen went on to say that “In this environment we think that the base metals will struggle to maintain upside momentum but do expect to see bottom-picking emerge in the precious metals space. The gold market is quite clean in terms of positioning in the leveraged space and the consolidation in the $1680-$1700 area seems to have seen a strong change of hands in positioning; the weak longs bailing.” He concluded by predicting that the gold price will “grind out a move towards the $1770-$1800 area in the coming month.”

Gold price will average $1,875 per ounce in the fourth quarter of 2011 and $2,000 in 2012

2011-11-29T07:59:00.002+08:00

The gold price surged Monday morning, rising $37.50 to $1,718 per ounce. Rumors that the International Monetary Fund (IMF) was preparing a €600 billion ($801 billion) rescue package for Italy, combined with strong retail sales in the U.S. over the weekend, helped fuel a potent rally in the stocks, commodities, and the price of gold. S&P 500 stock futures, which gained 33.20 to 1186.60, have fallen for seven consecutive trading sessions heading into the day. WTI crude oil rose 2.9% to $99.58 per barrel while copper advanced 2.7% to $3.37 per pound.

Commenting on the outlook for gold prices, Barclays Capital precious metal analyst Suki Cooper predicted in a recent Bloomberg interview that the gold price will average $1,875 per ounce in the fourth quarter of 2011 and $2,000 in 2012. However, she also stated that “In the near term prices look a little soft on the downside, but we still remain positive longer-term.”

Cooper attributed her bullish forecast to ongoing worries about the state of the global economy, which will continue to “support investor interest” in the yellow metal. She noted that physical demand for gold has been on the rise of late, and that “gold ETF flows picked up in October and this has continued into November.”

Looking ahead to the coming week, sovereign debt turmoil in Europe is likely to be a key driver for the gold price. German Chancellor Angela Merkel and French President Nicolas Sarkozy are scheduled to meet on December 9, at a summit to discuss potential changes to the European Union treaty. These changes could allow for a more robust set of measures to assist the European banking system and several of the PIIGS countries.

In the U.S., the economic calendar this week is particularly heavy with data that is likely to impact the price of gold. New home sales for October are due out on Monday, along with by the Case-Shiller report on home prices and Consumer Confidence reports on Tuesday. ADP employment data will be released Wednesday morning, followed by the Fed’s Beige Book in the afternoon. Weekly jobless claims are scheduled for Thursday, as well as the ISM Index, a key gauge of manufacturing activity. The most critical economic data point for the markets, however, will occur on Friday with the November non-farm payrolls report. If the data misses economists’ estimates, gold prices are likely to remain well supported, while a better than expected report could provide a headwind for the yellow metal.

Malaysia Retail Gold Price Still High

2011-11-28T07:56:00.002+08:00

gold price, online gold trading, gold, gold news update

Malaysia retail gold price still keep in high price when international gold price had dip below USD1,700 per ounce. However, in this price the demand on gold still high in Malaysia.

Would not be surprised to see gold push lower

2011-11-26T08:19:00.003+08:00

While we continue to believe that gold, structurally and fundamentally, remains in an upward trajectory, we would not be surprised to see gold push lower, and even push towards its 200-day moving average of $1,600. There are two factors which are putting downward pressure on gold. The first is weak EM currencies in general, and the Indian rupee (INR) in particular.

The second is funding stress in Europe. Physical demand is much weaker than it was six weeks ago. Much of the demand weakness is from India where the rupee has depreciated by more than 7% since the start of November. This has pushed gold denominated in rupees to all-time
highs this month. Even now, with gold coming off in dollar terms, gold denominated in rupees is still very close to its all time highs. In August, with gold around INR80,000/oz — INR83,000/oz, we saw strong demand, especially from India. Currently the gold price is at INR88,000/oz. If the rupee stays around the current INR52/$ level, and gold falls to $1,600, gold denominated in rupees would be back at the INR83,000 level. We expect stronger demand from India once again at those levels.

As far as investment demand is concerned, funding stress, especially for European banks remains, as is evident from the Euribor/OIS spread which remains at elevated levels. We continue to believe that the dominant fundamental driver of gold is global liquidity, followed by real interest rates. Funding stress puts pressure on liquidity and thereby, gold too. Funding stress also raises real interest rates. If this stress becomes to acute, gold (and all other commodities for that matter, will come under extreme downward pressure). However,
we believe that major central banks would try to prevent a money market breakdown akin to 2008. We also believe that this assistance would prevent gold from collapsing.

As a result, we would see a price dip towards $1,600 as a buying opportunity.

Gold has been propped up by physical demand

2011-11-25T07:44:00.002+08:00

Worse-than-expected data flow on Eurozone economic activity and a disappointing German bond auction, saw the dollar maintain a strengthening trend for most of yesterday. For most of the day, precious metals in turn were weighed down by the stronger dollar, with gold and silver finally managing to make modest gains during US trading hours, and overnight in Asia.

For the most part, gold has been propped up by physical demand, as buyers see current prices as particularly lucrative, while silver has been riding on gold’s coat tails. However, the extent of physical demand we are seeing has not been substantial enough to push gold significantly. For any significant move upward in precious metals, we’d need to see the dollar weaken.

Given that European equities appear to be staging a bit of a recovery today, perhaps we will see downward pressure on the euro ease further, which could open the way for more upside in precious metals, and commodities in general.

In the end my survival vehicle will be gold

2011-11-24T07:46:00.003+08:00

The gold price fell back under $1,700 per ounce Wednesday till Thursday morning. At $1,691, the price of gold has fallen over $100 from its November 7 closing price of $1,795. Weakness in global stock and commodity markets has weighed on gold as a wave of deleveraging has hit asset prices across the board. S&P 500 stock futures fell 10.30 to 1172.50 this morning while cyclically-sensitive copper and platinum prices dipped 2.7% and 1.1% to $3.25 per pound and $1,554 per ounce, respectively.

Russell went on to say that “My advice. We are moving closer and closer to what I call ‘survival period’ — the period where the magic of compounding turns into what will be the poison of compounding. This isn’t a time for timing. This is a time for action. Reduce your exposure to bonds and all items that provide fixed interest rates. Similarly, reduce your exposure to stocks except the gold miners. Look to expand your positions in inflation-protected assets, especially gold.”

“Those who are holding stocks in the hopes of the usual rebound are going to be terribly disappointed in the years ahead. This bear market is going to be unlike anything we’ve ever seen before. In the end my survival vehicle will be gold. I say again, timing is hopeless. Gold will have purchasing power and true wealth as almost everything else is destroyed by this unprecedented bear market.”

Lastly, Russell once again spared few punches in criticizing America’s policymakers. ”The US Government is now so loaded with ever-growing debt that it has become a mathematical freak. We return to different times, when rising interest rates will eat up the US government. With $55 trillion in assorted debts, the US is in no shape to deal with rising interest rates. We are in a state of reverse compounding, leading to inevitable bankruptcy on a massive scale.”

Price of gold was supported by a worse than expected revision to third quarter U.S. GDP

2011-11-23T05:59:00.003+08:00

The gold price rebounded Wednesday morning from yesterday’s steep sell-off, by $21.74, or 0.9%, to $1,699.11 per ounce. The price of gold was supported by a worse than expected revision to third quarter U.S. GDP – which at 2.0% came in well below the 2.5% consensus estimate among economists. Silver bounced modestly in concert with the gold price, by 0.4% to $31.74 per ounce. European markets were modestly lower in Germany and France, while U.S. equity markets looked to open slightly in the red as well – with S&P 500 futures down 4.00 points, or 0.3%, at 1,186.75.

A sharp sell-off in European markets quickly spread to the U.S. yesterday, forcing investors to raise cash by selling any and all asset classes – including those tied to the gold price. A cautious report from Moody’s Investors Service on France helped fuel the fire. The rating agency warned that a sustained rise in French bond yields combined with slower economic growth could threaten the nation’s AAA credit rating.

In the U.S., the “super committee” – an evenly-weighted panel of Congressional Democrats and Republicans – was unable to come to terms on a deficit reduction plan. The stalemate has led to growing uncertainty over the possibility of further extensions to the Bush tax cuts and unemployment benefits – two items that have provided considerable short-term stimulus to the U.S. economy.

While growing economic and political uncertainty has historically been a positive for the gold price, at present investors’ need to raise cash has trumped such bullish factors. Nonetheless, central banks remain committed to fighting deflation with a host of accommodative monetary policies that are likely to support the price of gold over the longer-term.

Gold strategists at Deutsche Bank echoed such sentiments in a note to clients on Monday. “In an environment where real interest rates are negative and the US equity risk premium is high we expect this will sustain strong private and public sector demand for gold,” the firm wrote. “However, this week has shown that gold has become more vulnerable to environments where the US dollar is strengthening.”

The price of gold briefly traded under $1,700

2011-11-22T08:05:00.003+08:00

The gold price declined Tuesday Morning, sliding $48.85 to $1,712 per ounce. The price of gold briefly traded under $1,700. Weakness in global stock prices pressured the yellow metal as well as the entire commodities complex. Ongoing sovereign concerns over Europe’s debt crisis combined with news this morning that the “super committee” in the U.S. has failed to reach an agreement to cut $1.2 trillion in spending. Oil and copper fell 1.5% and 2.2% to 96.32 per barrel and 3.34 per pound, respectively, while S&P 500 stock futures retreated 15.50 to 1198.40.

Commenting on the move lower in financial markets, long-time commodities investor Dennis Gartman wrote in The Gartman Letter on Friday that ”No prisoners were taken and no place offered solace. The grains plunged; energy plunged; equities obviously plunged; the base metals plunged… and all of these were understandable amidst the chaos of the moment, but gold plunged perhaps the worst of all, falling precipitously and falling relentlessly. Nothing proved to be safe, save perhaps US and German debt securities, and nothing is proving to be safe again this morning as fears arise that the margin clerks are again moving to the fore, pencils sharpened and liquidation orders in hand.”

Gartman later discussed the gold price specifically, saying that “This then brings us to gold and gold plunged…violently… relentlessly and without respite. As stocks fell, gold fell, for the market is concerned that there shall be more selling from the likes of Mr. Paulson and other hedge fund managers who had hoped that they were on the mend but whose hopes were dashed Wednesday afternoon as stocks swooned late in the day, setting up yesterday’s further weakness.”

While Gartman acknowledged that the gold price could head further south in the short-term, he reiterated his longer-term positive outlook. “Underpinning our long standing bullishness of gold was the expectation that eventually the Germans will have to ‘give’ on their position against central bank monetization of sovereign debt and that when they do so gold would soar. That may still happen. It may happen this weekend, or next month or next year, but it will happen. There is nothing else that the Europeans can do to bring themselves out of the recession into which they are falling. But for now, Berlin is intransigent and the margin clerks loom.”

“Is the bull market still intact for gold?” Gartman posited. ”Yes, of course it is, but the short term is wrought with danger and we’ve no choice but to use rallies today and perhaps Monday to lighten up our positions a bit.”

Although the economic calendar is relatively light this week due to the Thanksgiving holiday in the U.S., there are a few key data points likely to serve as catalysts for the gold price. Existing home sales for October will be released on Monday, followed by second quarter GDP and the latest Fed minutes on Tuesday. Wednesday follows with weekly jobless claims, durable goods, and University of Michigan Consumer Sentiment.

The long-term technical outlook does favor higher prices in 2012

2011-11-21T08:14:00.001+08:00

With gold suffering its worst week since September 19-23, many investors have been left wondering if further downside lies ahead.

The tepid performance of the yellow metal in recent months has led to a rising sense of “apathy” among gold investors, according to Forbes contributor Tom Aspray. This afternoon, Aspray argued that this recent lack of interest in the gold sector is a likely catalyst for higher prices in the months ahead.

“The $54 decline in the February Comex Gold contract Thursday took the futures to two-week lows, while SPDR Gold Trust (GLD) lost 2.5%,” Aspray wrote. “The rather steep decline did not seem to drive headlines like it would have a few months ago…Most analysts seem to be pointing to the drop in crude oil prices and firmer US dollar for gold’s decline. Another factor may be the missing $600 million in MF Global customer funds, which has jarred the confidence of futures traders around the world.”

Aspray went on to say that “The lack of reaction to gold’s drop is what I would expect from a market that is in a consolidation phase. These are typically marked by sharp rallies and sharp declines. It has been almost three months since gold topped in early September, and many of those that were caught up in gold’s powerful summer rally appear to have lost interest.”

He subsequently discussed his contrarian perspective on the gold market, contending that “Apathy, of course, is what the gold market needs in order to form a base from which to launch its next rally. An increase in bearish sentiment would also help, but we may not get it.”

Aspray noted that “The long-term technical outlook does favor higher prices in 2012,” but did not provide a specific gold price target.

World Gold Council presented a bullish outlook on the gold in its Gold Demand Trends report

2011-11-19T07:23:00.002+08:00

The gold price rebounded Friday closing, advancing $5.20 to $1,724 per ounce. The price of gold stabilized following yesterday’s $44.53, or 2.5%, decline amid heightened European sovereign debt concerns and fresh worries over the prospect of a recession across the Atlantic. S&P 500 stock futures rose 8.40, crude oil climbed 1% to $99.79 per barrel, and the cyclically-sensitive copper price gained 1.2% to $3.45 per pound. Stocks, commodities, and gold received a boost from the news that the European Central Bank was actively purchasing Italian and Spanish bonds.

In Europe, yields on Italian and Spanish debt moved lower as the European Central Bank intervened to purchase the debt of these fiscally-strapped nations. How aggressive the ECB will be is the subject of much debate. What is clear is that yields must come down or countries such as Italy will face rapidly escalating debt to GDP ratios.

The crisis in Europe has caused investors to “move out of risky assets,” according to Marcus Grubb, managing director of investment research at the World Gold Council (WGC). “They move out of equities, they move into short-dated bonds and into cash,” Grubb added, “and they even move out of gold because they tend to take profit in it to shore up losses in the rest of their portfolio.”

Despite Grubb’s cautious near-term stance on the gold price, the World Gold Council presented a bullish outlook on the gold in its Gold Demand Trends report for the third quarter of 2011. “Increasing levels of inflation, the US credit rating downgrade, a worsening eurozone sovereign debt crisis and the lackluster performance of many assets drove investors to increase holdings in gold (during the quarter) in order to protect their wealth,” the report noted.

“Given gold’s proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating,” the WGC contended. “The long-term fundamentals for gold remain strong, with a diverse and growing demand base coupled with constrained supply-side activity.”

Global gold demand climbed to a new all-time high in the third quarter of 2011

2011-11-18T07:40:00.002+08:00

Global gold demand climbed to a new all-time high in the third quarter of 2011, and by 6.0% over the prior year period, according to the World Gold Council (WGC).

As of September 30, 2011, gold demand stood at 1,053.9 tonnes, valued at $57.7 billion. The figures come from the WGC’s Gold Demand Trends report for Q3 2011.

The WGC noted that the rising demand “was driven by investment demand which rose by 33% year-on-year to 468.1 tonnes, generating record quarterly demand of US$25.6bn.”

Commenting on the data, Marcus Grubb – Managing Director, Investment at the World Gold Council – stated that “Increasing levels of inflation, the US credit rating downgrade, a worsening eurozone sovereign debt crisis and the lacklustre performance of many assets drove investors to increase holdings in gold in order to protect their wealth. Given gold’s proven risk mitigation properties, it is likely that investors will continue to seek protection from economic uncertainty, which shows no signs of abating.”

“The long-term fundamentals for gold remain strong,” Grubb added, “with a diverse and growing demand base coupled with constrained supply-side activity.”

The full Q3 2011 report is available at the WGC’s website:

http://www.gold.org/media/press_releases/archive/2011/11/gold_demand_trends_q3_2011_pr/

Gold price continues to have time on its side

2011-11-17T07:33:00.002+08:00

The gold price declined Wednesday, sliding $8.00 to $1,772.75 per ounce.Gold prices fell alongside broad-based weakness in global equity markets. The euro retreated against the U.S. dollar after a Bank of England statement warning that Europe’s sovereign debt crisis may have a “significant adverse” impact on the economy. S&P 500 stock futures fell 12.40 to 1241.70. Bucking the downtrend was crude oil, which broke out through $100 per barrel for the first time since July.

The gold price initially slid to as low as $1,759.10 per ounce in overnight trading after the release of Paulson & Co.’s latest 13-F filing. The firm – run by hedge fund magnate John Paulson – has been the largest holder of the GLD since the first quarter of 2009. The 13-F filing disclosed that Paulson & Co. sold 11.2 of its 31.5 million GLD shares during the third quarter of this year.

In spite of the sales, Paulson & Co. remains the largest holder in the GLD, with 20.3 million shares. Speculation arose that he may have sold at least a portion of fund redemptions, which were roughly 10% according to numerous reports. While Paulson reduced his GLD holdings, legendary investor George Soros increased his stake. Soros Fund Management raised its holdings from 42,800 as of June 30 to 48,350 shares. Other notable hedge fund managers – including Paul Tudor Jones and Paul Touradji – went from not having a GLD position as of June 30 to holding 200,000 and 45,000 shares, respectively, as of September 30.

Looking ahead, it is evident that despite Paulson’s sales, many highly-respected investors continue to accumulate significant positions tied to the gold price. The fact that Soros – who earlier this year was quoted as saying that gold is “the ultimate bubble,” – raised his GLD stake speaks to the strength of the yellow metal’s bull market.

As for Paul Tudor Jones, in October 2009 he wrote in an investor letter that “It (gold) is just an asset that, like everything else in life, has its time and place. And now is that time.” Based on his more recent actions, it appears that the gold price continues to have time on its side.

Gold prices have traded in a tight band over the past two weeks as yields on European sovereign debt have soared

2011-11-16T07:45:00.002+08:00

The gold price continued to consolidate under the $1,800 per ounce level Tuesday amid the turmoil in Europe. Gold prices have traded in a tight band over the past two weeks as yields on European sovereign debt have soared. Italy’s 10-year bond yield spiked through 7% early this morning. In a note this morning, Susquehanna Financial Group highlighted that “spreads between Belgian, French, Spanish, Italian bonds and the German 10-year bunds are blowing out.” S&P 500 stock futures sank 10.10 to 1242.30 while copper prices fell back under $3.50 per pound.

Despite Monday’s gold price decline, the Gold remains higher by 25.3% on a year-to-date basis and is on pace for its 11th consecutive annual advance. The macroeconomic backdrop of rampant currency debasement and negative real interest rates, among other factors, has continued to push gold prices to new highs. Many market strategists believe this trend is likely to continue in the years ahead, as central banks in the world’s most developed economies remain committed to fighting deflation with easy monetary policies.

The latest investment bank to raise its gold price forecasts was Goldman Sachs, which in a recent note to clients wrote that the escalating sovereign debt crisis in Europe is “skewing the balance of risks to higher gold prices” over the next year. “We expect gold prices to continue to climb in 2011 given the current low level of US real interest rates,” the firm contended. “Further, with our US economics team now forecasting slower US economic growth in 2011 and 2012, we expect US real interest rates to remain lower for longer, supporting higher gold prices through 2012.”

As for specific gold price targets, Goldman Sachs lifted its three-month estimate to $1,760 from $1,645 per ounce, its six-month estimate to $1,830 from $1,730 per ounce, and its 12-month estimate to $1,930 from $1,860 per ounce.

Gold Price Hovers Under $1,800

2011-11-15T07:59:00.003+08:00

The gold price dipped Monday, trading lower by $7.00 at $1,781.50 per ounce. Gold price have been relatively stable amid regime changes in both Greece and Italy. The resignation of Silvio Berlusconi from the post of Prime Minister initially led to lower bond yields in the fiscally-strapped nation, but sellers came in and sent yields higher. Italian 10-year bond yields traded at 6.61% heading into the opening bell on Wall Street.

The center of sovereign debt concerns shifted last week from Greece to Italy, as surging Italian bond yields added further uncertainty to an already dire situation. Speculation has risen that Italy will be the next member of the PIIGS to need financial assistance from some combination of the European Financial Stability Facility (EFSF), the International Monetary Fund (IMF), and/or the European Central Bank (ECB). While the EFSF would likely be the initial source of aid, its current size is unlikely to be sufficient to stem the tide of the Italian crisis.

With the situation in Italy escalating, several economists and policymakers have called for the ECB to step up to the plate with a robust set of money printing measures to help combat the crisis. One notable individual in this camp is Portuguese President Anibal Cavaco Silva, who stated in a Bloomberg interview last week that the ECB “has to go beyond a narrow interpretation of its mission and should be prepared for foreseeable intervention in the secondary market, not as the central bank has done up to now…It has to be able to be a lender of last resort.”

Notwithstanding the fact that explicit money printing is in violation of the Maastricht Treaty – which led to the creation of the euro currency, and over whose signing Silva presided – support for the ECB to ignite the printing presses has risen substantially as the economic environment in Italy has deteriorated. The gold price stands to be a prime beneficiary of further currency debasement.

Investors are growing increasingly optimistic about a recession in the US which is curbing safe-haven demand

2011-11-14T07:55:00.005+08:00

Last week, gold has managed to claw back most of the lost ground amid continued uncertainty surrounding the Eurozone. Now, we see the Italian senate vote on austerity measures to rein in the country’s debt, as well as the installation of a new prime minister in Greece. The mood is tentatively upbeat (European equities are marginally up), which explains the muted gains in gold, with safe-haven buying relatively lacklustre.

Even in the gold physical market, after a strong surge last week closing, buying has dropped off since than. Support however exists at the $1,740 level. Barring any major developments or surprises on the Eurozone front, we foresee mostly sideways action in gold today. In addition, the US is on holiday in observance of Veteran’s Day, so the usual catalyst for action later in the day is absent.

In terms of data flow today, an improved US consumer confidence reading might further dent investor enthusiasm, especially gold and silver. Investors are growing increasingly optimistic about a recession in the US which is curbing safe-haven demand.

Gold support is at $1,742 and $1,719. Resistance is $1,783 and $1,800.

Any scenario in which Italy ends up requesting financial aid help gold price up

2011-11-12T10:11:00.004+08:00

The gold price rebounded on Friday closing, climbing $19.70 to $1,788 per ounce. The price of gold rose alongside oil, copper, and the bulk of the commodities complex. Risk appetites, which have fluctuated wildly over the course of the week, expanded heading into the weekend. S&P 500 stock futures rose 11.80 to 1249.20. University of Michigan consumer confidence survey will be released at 9:55am eastern time. The U.S. Treasury market is closed in observance of Veteran’s Day.

Any scenario in which Italy ends up requesting financial aid is likely to put further pressure on the euro currency and strengthen the case for additional money printing in Europe. This concept is not lost on the gold price, which despite Thursday’s decline remains higher by 23.7% on a year-to-date basis.

Commenting on the longer-term outlook for the gold price, legendary investor Jim Rogers stated in a CNBC interview that the yellow metal’s bull market is far from over. The price of gold “will easily go to $2,000 but it will reach $2,400 over the course of the bull run, which has years to run.”

As for when the gold price bull market will eventually end, Rogers – famous for managing the Quantum Fund with George Soros and for his bullish stance on commodities over the past decade – admitted that he has little to no idea. “It will end in a bubble when this is over. The way bull markets work is they go up and up and then by the end they turn into a bubble and that will happen to gold… That could be five years, 18 years or six years.”

Rogers went on to disclose that he continues to hold positions in both gold and silver, although he presently prefers the white metal because it is cheaper on a historical basis. In contrast to the gold price, however, Rogers did not provide a specific silver price target.

Sooner or later the ECB will have to ‘print’ more liquidity

2011-11-11T07:35:00.003+08:00

The gold price stabilized Thursday morning near $1,770 per ounce following considerable weakness yesterday. The spot price of gold fell to $1,753.00 in overnight trading, but rebounded as the U.S. dollar turned lower against a basket of the world’s leading currencies. Euro zone debt concerns remained at the forefront of financial news this morning, although equity markets across Europe bounced back from several days of losses. U.S. equity markets looked to open higher as well, with S&P futures up 1.3% at 1,241.75.

Dr. Martin Murenbeeld, chief economist at Dundee Wealth Economics, discussed the implications of the debt crisis for the price of gold in a recent note to clients. “For gold, the end game should be clear,” he wrote. “Sooner or later the ECB will have to ‘print’ more liquidity – buy more government paper. I believe that the ECB should print sooner rather than later, before the crisis in Greece leads to an abrupt, unscheduled, rogue withdrawal of Greece from the Eurozone, with massive defaults to follow.”

“The technical picture remains very constructive for gold,” Murenbeeld added. “Bullion is back above its 50-day moving average, and it hasn’t threatened its 200-day moving average since mid-2010. Once the ECB is forced to leverage its balance sheet gold should rise to new highs, but there could be much volatility before then.”

Murenbeeld, who has been bullish on the gold price for many years, did caution that “This crisis can end badly for gold, at least for a period of time, if the OECD plunges into recession on the back of a depression in Europe, and China has a hard landing.”

However, he contended that “Inevitably…such developments will beget massive policy reflation, including more central bank ‘printing’, currency devaluation, and protectionism. We expect gold to then rise well over $2450 – which is what the peak of $850 in 1980 works out to when adjusted for inflation.”

The price of gold advanced near $1,800 per ounce as confidence in Italy’s ability to bring its fiscal deficit under control is evaporating

2011-11-10T07:55:00.003+08:00

The gold price climbed Wednesday morning as Italian bond yields spiked through 7.5%. The price of gold advanced near $1,800 per ounce as confidence in Italy’s ability to bring its fiscal deficit under control is evaporating. Yesterday’s news that Italian Prime Minister Silvio Berlusconi agreed to resign following the approval of an austerity plan temporarily stabilized financial markets, but investors resumed selling Europe’s sovereign debt on worries that the crisis was set to infect the rest of Europe at a more rapid pace. S&P 500 stock futures tumbled 27.30 to 1245.90.

The escalating potential for deflation was evident last week as the European Central Bank (ECB) and Federal Reserve conducted their respective monetary policy meetings. The ECB unexpectedly cut its benchmark interest rate, with new President Mario Draghi noting that “particularly high uncertainty and intensified downside risks” were key factors behind the decision. As for the Fed, the tone of its policy statement was notably more dovish than from prior meetings, with President Evans casting a dissenting vote in favor of further accommodation. The Fed’s stance led to increased speculation that a third round of quantitative easing (QE3) could be likely in the months ahead.

Commenting on the outlook for the gold price, Bart Melek – TD Securities’ Head of Commodity Strategy – wrote in a report published this week that “Promises of very easy monetary policy from the Fed that could see some additional ‘money printing’ and ECB interest rate cuts have made gold investors quite happy…We expect more upside longer term, with the inevitable headline related choppiness as part of the gold landscape.”

The gold price “has rallied and will continue to move higher into 2012 because the very low and declining short and long term yields will reduce the real opportunity cost of holding gold,” Melek added. “All this easy money, high national debts and systemic risk should also firm up demand for the metal as a hedge.”

Melek went on to say that “There is also concern that the ECB may eventually need to ‘print’ money in order to backstop the European debt mess. We are not saying that this is our base case, but merely that it is a risk that the gold market has responded to.”

Ben Bernanke may continue to believe that gold is not money

2011-11-09T07:35:00.002+08:00

The gold price slipped slightly lower Tuesday, trading off $6.00 at $1,788 per ounce heading into the opening bell on Wall Street. The price of gold has been boosted by concerns that rising Italian bond yields will lead to the ousting of Prime Minister Berlusconi. Safe haven flows have helped drive gold prices back near $1,800 per ounce. S&P 500 stock futures moved higher, gaining 6.00 to 1263.50 ahead of a vote on Berlusconi’s budget.

While Federal Reserve Chairman Ben Bernanke may continue to believe that gold is not money, senior government officials from around the world apparently disagree. Over the weekend German newspapers reported that policymakers at the G20 summit in France discussed the idea of having the German central bank sell a portion of its gold reserves to fortify the European Financial Stability Facility (EFSF). However, senior German officials quickly refuted the plan. Economy Minister Philipp Roesler was quoted as saying that Germany’s gold reserves “remain untouchable.”

Commenting on the developments, analysts at Scotia Capital wrote in a note to clients that “The week ahead looks positive for the price of gold…Political instability in Italy and Greece brought back European debt worries that sent gold up over 1% to $1,745/oz. Almost immediately after George Papandreou stepped down as prime minister of Greece, word spread of Italian Prime Minister Silvio Berlusconi being pressured to step down from his post as the contagion pushed Italy’s borrowing costs to modern day records.”

“The general sentiment among investors and the general public seems to be that the European debt woes will get worse before they get better,” Scotia Capital added, “a factor that bodes well for the price of gold for the balance of 2011 and 2012.”

Gold price climbed higher Tuesday morning, advancing $41.25 to $1,792 per ounce

2011-11-08T07:23:00.003+08:00

The gold price climbed higher Tuesday morning, advancing $41.25 to $1,792 per ounce. The price of gold moved to a six week high as Italian 10-year bond yields spiked through 6.5%. Greek Prime Minister George Papandreou agreed to step down yesterday, paving the way for a national unity government. Stock markets came under pressure Monday as Italian Prime Minister Berlusconi came under pressure to resign amid a growing lack of confidence in his nation’s ability to service its debt load at current interest rates. S&P 500 futures fell 7.80 to 1243.30.

In light of these developments, long-time gold investor John Hathaway asserted in an interview with King World News that the outlook for the gold price remains particularly bright. “People got shaken out when gold went below $1,600. The price of gold has come right back up and it’s left all of those investors as sold out bulls, so it’s great action…The ones that were enthusiastic when gold was $1,900 are nowhere to be seen now. A lot of that money is now on the sidelines and I think it’s fantastic.”

Hathaway, portfolio manager of the Tocqueville Gold Fund, went on to say that “We saw Europe cut interest rates…That probably won’t be enough, they will have to do that some more. Europe is slowing down and that’s kind of scary. It just seems to me that you have the ingredients for a new high in gold.”

“Bernanke has itchy trigger fingers on the next quantitative easing,” Hathaway added. “He didn’t want to say it in so many words, but most of the commentary seems to anticipate another round of quantitative easing. So things look great for gold.”

As for gold equities, Hathaway noted that “These companies are making a huge amount of money and the stocks are going up and the analysts are saying, ‘Big deal.’ Like I said, there is no enthusiasm and I think that’s great.”

Malaysia Retail 916 Gold Price Up Again To RM197

2011-11-06T07:57:00.002+08:00

Malaysia retail gold price is up again to RM197 level again. If European solution end up by print more money, gold price will move up more.

The driving force in the gold market is the problems in the euro

2011-11-05T08:53:00.003+08:00

The gold price traded in a tight range Friday morning after the release of the U.S. unemployment report. Gold price closing this week with fell $11.00 to $1,754 per ounce on the news that 95,000 nonfarm payrolls were created in October. The unemployment rate fell from 9.1% to 9.0%. Business confidence remains subdued as negative macro-economic headwinds, notably the sovereign debt crisis in Europe, swirl. S&P 500 stock futures fell 4.70 to 1251.00 after the employment report.

The driving force in the gold market is the problems in the euro. The most important factor impacting the price of gold currently is the ongoing set of problems with the euro currency, according to long-time commodities investor Dennis Gartman.

In a telephone interview with Bloomberg, the author of The Gartman Letter stated that “The driving force in the gold market is the problems in the euro. Central banks in Europe and individuals will want to lower their euro holdings and buy gold since no one knows what is happening to the euro.”

Gartman went on to predict that “The euro is heading towards parity once again,” meaning a 1:1 ratio against the U.S. dollar.

The euro last reached parity versus the greenback in 2000, and hit a five-year low of 1.1874 in May 2010 when the sovereign debt crisis in Greece first rattled financial markets.

In the shorter term, Gartman suggested the euro may fall to 1.30 against the U.S. dollar; it is currently at 1.3771 in Friday afternoon trading. Gartman did not provide a specific gold price target, however.

The euro-denominated gold price reached an all-time high €1,374.76 on September 12, 2001 and is presently trading at €1,276.90 per ounce.

So long as deflation remains the Fed’s chief threat, the gold price is likely to remain well supported

2011-11-04T08:03:00.003+08:00

The gold price rallied $19.27 to $1,760.79 per ounce Thursday morning after the European Central Bank (ECB) unexpectedly cut its benchmark interest rate by 25 basis points to 1.25%. The price of gold traded modestly lower near $1,725 in overnight trading, but turned sharply higher as ECB President Mario Draghi – who took over for Jean-Claude Trichet earlier this week – wasted little time in providing a clear signal on the severity of the European sovereign debt crisis.

Although the Fed did not launch a third round of quantitative easing (QE3) – as some economists were predicting –the FOMC’s tone was more dovish than expected. Evans’ dissent, coupled with the lack of hawkishness from the other Presidents, helped signal that the Fed is “clearly inching towards easing further,” Greenhaus asserted in a note to clients.

While Greenhaus did not discuss the implications of further easing for the gold price, history suggests that they would be particularly positive for the yellow metal. At the post-FOMC press conference, Chairman Bernanke once again noted that inflationary risks remain low, while the deflationary impact of high unemployment and weak real estate markets continues to be a significant drag on the economy. So long as deflation remains the Fed’s chief threat, the gold price is likely to remain well supported.

When we look at gold five years from now, we will say gold was wildly cheap

2011-11-03T07:44:00.002+08:00

The gold price climbed Wednesday ahead of the widely anticipated conclusion of the two-day Federal Open Market Committee (FOMC) meeting. The price of gold advanced $8.50 to $1728.30 per ounce as traders and investors prepared for a dovish post-FOMC policy statement from Chairman Bernanke. While a third round of quantitative easing may not be announced at today’s meeting, the Fed may prepare markets for an eventual resumption of the central bank’s asset purchase program. The broader stock and commodity markets also rose ahead of the announcement.

“When we look at gold five years from now, we will say gold was wildly cheap. What happens to gold is going to hinge on what happens to the dollar, and that is going to be influenced by what happens in Europe and monetary policy.”

The above comments came from Jason Schenker – president of Prestige Economics LLC in Austin, Texas and the fifth-best forecaster over the past three months in a Bloomberg survey of gold price predictions.

The price of gold is expected to rise to a new all-time high of $1,950 per ounce, based on the median estimate of eight of the top ten analysts over the past eight quarters, according to Bloomberg.

Jochen Hitzfeld – an analyst at UniCredit SpA in Munich who has been the most accurate forecaster tracked by Bloomberg over the past two years – commented that “There’s huge potential for gold in the coming years. Investors are buying gold. That’s reinforced by buying from central banks. Prices did run up a little bit too fast, but the drop was just a breather.”

Ronald Stoeferle of Erste Group Bank AG in Vienna, the second most-accurate forecaster, stated that “There is a loss of trust in the entire financial system and urgent need for safe-haven investment. The environment for gold is just perfect.”

Why the gold price may fall

2011-11-02T07:46:00.004+08:00

The gold price broke down through $1,700 per ounce Tuesday and bound back above 1,700 on Wednesday morning as global financial markets convulsed on fresh worries out of Europe. The gold price fell $27.90 to $1687 per ounce after Greek Prime Minister Papandreou announced he would he hold a referendum on Europe’s bailout plan. Stock markets in Europe plunged on concerns over an imminent Greek default and what the potential consequences of a disorderly default might mean. S&P stock futures fell 37.00 to 1212.30 while crude oil fell 3.8% to $89.61 per barrel.

Commenting on the gold price weakness, Macquarie analyst Stephen Harris wrote in a report published on Monday that “There has been some speculation in recent weeks about the potential for the central banks of heavily indebted European countries to sell their gold holdings and use the proceeds to pay down government debt. This speculation has been used both as an argument for why the gold price may fall and as a potential solution for addressing global sovereign risk concerns and helping to restore growth in developed economies.”

Harris disagreed with this assertion, noting his belief that “any gold sales by central banks are unlikely now and in the foreseeable future” for a myriad of reasons. These included the fact that the value of these nations’ gold holdings is too small to have a material impact on debt outstanding. Additionally, Harris contended that such a measure would flash a clear warning sign that worsens the “perception of a nation’s financial position.” Lastly, the Macquarie analyst asserted that “money printing works better” as long as credit markets are willing to continue to “accept central bank participation.”

Harris argued that the small likelihood of central bank gold sales, coupled with ongoing accommodative monetary policies in Europe and the U.S., is likely to drive gold prices higher. He noted that the gold price has historically risen 25% per annum when U.S. real short interest rates are negative, as is presently the case. “Thus, global easing and currency debasement will continue creating a bullish backdrop in the months ahead.”

Gold sentiment has begun to climb over the past week

2011-11-01T07:38:00.003+08:00

The gold price declined Tuesday morning as global financial markets shifted from “risk on” to “risk off.” The price of gold fell $21.80 to $1,722 per ounce, sinking alongside both stocks and commodities. S&P 500 stock futures fell 15.70 to 1265.20 while oil and copper fell 1.5% and 3.2%, respectively. Gold’s sister precious metal fell 2.8% to $34.30 per ounce as measured by front month silver futures on the COMEX.

Gold sentiment has begun to climb over the past week from a “very bearish extreme,” according to Macquarie Equities Research analyst Stephen Harris.

In a note to clients on Monday, Harris higlighted the Ned Davis Research (NDR) Daily Gold Sentiment Composite, which fell to 7.1 on October 14 – its lowest level since at least January 1, 2006 (he did not provide data going back further).

Since that time, the NDR Daily Gold Sentiment Composite has rebounded modestly – to approximately 12 – but remains well in the “pessimistic” zone.

From a contrarian and historical perspective, these readings are “very bullish” for gold prices, according to Harris.

“Near term there is a strong buying opportunity as sentiment towards bullion has reached a bearish extreme, but is starting to rebound,” he added. ”We view this recent price action as being very bullish. Sentiment has retrenched considerably with only a minor consolidation in price. In our view, the pullback from the spike above $1900 to the long trendline has been healthy and prices have begun to strengthen as we move into the seasonal strong year-end period.”

Share market likely to continues the up rally and gold price may stable above 1,700

2011-10-31T08:23:00.002+08:00

From last week, the gold price rose $134.80 (8.3%) hand in hand with silver up 482.9c (16%). That's as good as it gets. You can't expect moves like that to last forever -- or even very long.
Last Friday gold flattened, losing 50c to shutter Comex at $1,746.20. Think of a baseball thrown into the air, how it rises and rises and rises, then seems to hesitate and begins to fall.

Looking at a five day chart, gold was trapped below $1,660, broke out Tuesday and ratcheted to $1,725, then yesterday stepped to $1,750. Chart shows three plain steps. The gold price hit its 50 DMA yesterday ($1,739), a frequent target for upside corrections. Above awaits also the $1,775 milestone where gold broke down in late-September.

This week Share market likely to continues the up rally and gold price may stable above 1,700 level. European fix was sufficient illusion to suck in most of the world and give all the positive news.

Euro Plan Only Buys Time, More Defaults Ahead

2011-10-30T08:21:00.003+08:00

One of the world’s leading experts on sovereign debt crises sounded none too pleased with the euro zone’s new bailout plan announced yesterday. Kenneth Rogoff – a Harvard economics professor, former chief economist at the International Monetary Fund, and author of This Time is Different – stated that the plan “feels at its root to me like more of the same, where they’ve figured how to buy a couple of months.”

Speaking at the Bloomberg FX11 Summit in New York, Rogoff contended that “It’s pretty darn clear the euro does not work, that it’s not a stable equilibrium.”

Rogoff went on to say that “I don’t think there’s any doubt that we’ll see more defaults beyond Greece. The interesting question is will all the countries in the euro still be in the euro? My answer to that is no.”

“There’s just too many inconsistencies,” Rogoff added. The fact that a large number of independent nations are using a shared currency “is missing some big things and it’s just not in equilibrium.”

As for the positive response by financial markets yesterday, Rogoff stated that “My read of this is that the markets are cheered that they’re still alive. Even in a fairly short period, doubts will start to grow again.”

longer-term outlook for the gold price will remain quite favorable

2011-10-29T08:28:00.001+08:00

The gold price gave back a portion of yesterday’s gains on Friday morning, falling $7.89, or 0.5%, closing at $1,743.60 per ounce. The modest weakness in the gold price coincided with a firmer U.S. dollar, which advanced 0.2% against a basket of foreign currencies. Silver dipped alongside the price of gold, by $0.17, or 0.5%, to $34.93 per ounce.

The widespread gains in financial markets developed after a European summit resulted in a more robust financial rescue plan to alleviate the sovereign debt crisis. Euro zone officials announced plans to leverage the European Financial Stability Facility (EFSF) by a factor of between four and five and to provide guarantees on the sovereign debt of several other financially-troubled European nations. In addition, bondholders agreed to a 50% haircut on Greek sovereign debt.

Commenting on the European announcement, analysts at Goldman Sachs acknowledged several benefits of the plan, but also remained cautious until further details are revealed. In a note to clients, the firm wrote that “While progress in key areas was made, specific details are yet to be determined and further concrete measures are needed to address the Euro area’s economic challenges in a lasting way… Whether the increase in the EFSF’s indirect lending capacity will lead to a stabilisation of the situation depends on several factors, and there is no guarantee that the revamped EFSF will instil sufficient confidence among investors.”

Looking ahead, the gold price is likely to continue to be supported by uncertainty over the implementation of the new European rescue plans. Furthermore, the leveraging of the EFSF inherently involves more money printing, which is beneficial to the one currency that is no government’s liability – gold. As long as policymakers in Europe and the U.S. continue to fight deflation through rampant currency debasement, the longer-term outlook for the gold price will remain quite favorable.

We potentially have nothing but air to the upside in gold

2011-10-28T07:23:00.002+08:00

The gold price up $20.39 to $1,745.21 per ounce Thursday morning after European policymakers announced a comprehensive bailout plan that involves increasing the European Financial Stability Fund (EFSF) to €1.4 trillion and a 50% haircut on Greek sovereign debt. While the price of gold moved modestly lower, the broader equity and commodity markets surged higher. The euro currency turned sharply higher as well, rallying by 1.6% to 1.4129 against the U.S. dollar

Long-time gold bull John Hathaway presented his outlook for the gold price yesterday in an interview with King World News. Hathaway, who runs the Tocqueville Gold Fund, characterized the recent gold price rebound by saying that “To me we have had our correction, shook out a lot of people and now there is sellers remorse. Now those people are not able to get back in except by paying a higher price, so this is classic bull market action.”

Hathaway went on to question the soundness of two of the world’s leading fiat currencies. “Who wants to hold euros? And if the US starts to intervene through some form of central bank asset purchases, lines of credit, whatever it is they use, nobody is going to want to hold the dollar either.”

Although Hathaway also did not provide a specific gold price target, he predicted that “We potentially have nothing but air to the upside in gold. We could see a big number on gold before the end of the year. Nobody is going to want these paper currencies going forward. That’s kind of where we are now, we’re close to a big breakout.”

Gold Price Firm, QE3, Euro Meeting in Spotlight

2011-10-27T07:37:00.002+08:00

The gold price rose $6.08 to $1,711.26 per ounce Wednesday ahead of yet another euro zone meeting on the region’s sovereign debt crisis. The price of gold climbed to as high as $1,721.40 in overnight trading, but pared its gains amid a better than expected U.S. economic report. U.S. durable goods orders fell just 0.8% in September, beating the -1.0% consensus estimate among economists.

The disappointing consumer confidence data ushered in the latest gold price rally amid rising speculation that the Federal Reserve may soon launch a third round of quantitative easing (QE3). Market chatter over the likelihood of additional asset purchases increased noticeably following dovish commentary on Monday from New York Fed President William Dudley. At a speech on the economic outlook, Dudley stated that the U.S. central bank is most certainly not “out of bullets.” Dudley also noted that “It’s possible that we could do another round of quantitative easing,” but did not specify a time frame for QE3.

Commenting on yesterday’s gold price action, TD Securities analyst Bart Melek wrote in a note to clients that “Gold jumped more than $39/oz to about $1,693/oz in recent trading, as US long bond yields dropped sharply due to Fed buying. The 10-year treasury yield fell some 7.9bps to 2.155%, bringing the opportunity cost of holding gold down materially. Given the possibility that the Fed will take additional quantitative easing (QE) action to help the economy, it is likely that gold will continue to get bid higher into the New Year.”

Melek went on to say that “The Federal Reserve has started buying long-dated Treasury bonds as part of its $400bn program (Operation Twist) to replace short-term debt with longer-term governments bonds in an effort to reduce borrowing costs. This, along with speculation that the US central bank could help US growth by potentially introducing another round of quantitative easing, which would likely include the purchase of mortgage securities, has sent bond yields sharply lower today. Aside from the lower real yield, concerns that new QE action may lift long-term inflation and work against the US dollar should fuel investor gold purchases.”

Gold price held steady near $1,699 per ounce Wednesday morning

2011-10-26T07:46:00.002+08:00

The gold price held steady near $1,699 per ounce Wednesday morning as euro zone sovereign debt concerns continued to be at the forefront of financial headlines. The price of gold climbed to as high as over $1,700 in overnight trading, but pared its gains as the U.S. dollar rebounded against a basket of foreign currencies. The SPDR Gold Trust (GLD), a proxy for the gold price and the world’s largest gold ETF, traded near unchanged at $161.01 per share.

The rally in gold came despite two key factors that have kept a lid on the gold sector in recent weeks: a broad-based sell-off in equities and strength in the U.S. dollar. Today’s action has been more reminiscent of how the sector performed in August, when gold stocks finally began to outperform the price of gold on the upside. While one day does not make a trend, today’s developments are an encouraging sign for a sector that has faced considerable selling pressure since the middle of September.

Gold Sentiment Hits Multi-Year Low, Time to Buy?

2011-10-25T07:49:00.004+08:00

The gold price climbed higher Monday, rising back above the $1,650 per ounce level. Despite the fact that European leaders decided at this past weekend’s summit in Belgium not to use the European Central Bank’s balance sheet more aggressively to combat the sovereign debt crisis, investors bid up the price of gold anyways. Gold prices have been mired in a correction as debate rages over whether the current deflation scare is in the process of sending the global economy into a new recession.

The Hulbert Gold Newsletter Sentiment Index (HGNSI), a closely followed measure of investor views on the price of gold, tumbled to -13% as of last Friday. The HGNSI – which measures gold timers’ recommended exposure to the gold – fell into negative territory for only the third time this year. Each instance was “associated with important bottoms” in the gold price, according to HGNSI founder Mark Hulbert. In addition, the HGNSI reached its lowest level since the depths of the financial crisis in the fall of 2008. The negative reading indicated that gold timers recommended a net short exposure to the gold , a relatively rare occurrence.

From a contrarian perspective – a view that Mark Hulbert frequently espouses – the severely low sentiment reading is a bullish factor. As noted above, on each prior occasion when the HGNSI fell into the red, the price of gold soon turned higher. Based on the data, investors could certainly pick a worse time than now to buy gold.

Gold have been relatively range-bound

2011-10-23T07:00:00.000+08:00

Gold have been relatively range-bound since end of last week, with reactions to developments on the Eurozone debt crisis contributing to volatility but providing little direction. An announcement by French and German officials that this weekend’s EU summit will not see a final agreement on plans for the European Financial Stability Fund (EFSF), has deepened the malaise across markets. It was however stated that next Wednesday should see a decision reached on the outstanding issues concerning the EFSF.

Until any decisive actions are agreed upon (and hopefully this will be Wednesday), we foresee a continuation of the current directionless trade, accompanied by heightened volatility. With apparently still so much confusion and uncertainty surrounding a possible plan to contain the region’s debt crisis, we don’t hold out much hope for anything that will renew confidence next
week.

Gold physical buying remains intact, but with the speculative market still appearing to position for further downside (as we see in the options market, with puts continually being bid up) and relatively thin trading volumes, it will be difficult for gold to make any significant break upwards. In addition, the dollar remains well supported, adding another drag on gold, and commodities in
general.

Gold support is at $1,603 and $1,582. Resistance is $1,645 and $1,666.

Gold Price Surges as Europeans Prepare to Fire up Printing Press

2011-10-22T08:20:00.004+08:00

The gold price spiked toward $1,650 per ounce Friday, rallying on the back of weakness in the U.S. dollar and on speculation that European leaders were prepared to print over a trillion dollars to prevent a systemic crisis. Ministers from all 27 members of the European Union will meet tomorrow to discuss how to bolster market confidence in the integrity of its banking system. Stock and commodity prices moved higher across the board with the $31.90 rise in COMEX gold futures accompanied by a 5.1% rise in copper and a 1.7% gain in crude oil.

Earlier this week, the gold price and broader financial markets received a boost from a report by The Guardian that European policymakers agreed in principle to expand the EFSF to €2 trillion. However, officials later refuted the report, placing renewed pressure on stocks and commodities.

As for the impact of the euro zone crisis on the gold price, analysts at Bank of America Merrill Lynch noted that the gold could face further headwinds in the short-term if broad-based liquidation resumes in the markets. However, the firm also asserted that “looking further out we maintain our 12-month price target of $2,000/oz, as the global macro economic backdrop remains supportive.”

Gold price showed a muted reaction to the weekly U.S. jobless claims report

2011-10-21T07:31:00.002+08:00

The gold price retreated $19.48 to $1,621.18 per ounce Thursday as weakness in gold continued this morning. The spot price of gold fell to as low as $1,606.90 in overnight trading, but pared its losses as the U.S. dollar turned lower against a basket of foreign currencies. Silver prices fell as well, by $0.56, or 1.8%, to $30.69 per ounce. The gold price showed a muted reaction to the weekly U.S. jobless claims report, which at 403,000 met the median estimate among economists.

Despite the heightened volatility in financial markets in recent weeks, the gold price has largely traded between $1,600 and $1,700, and remains 15.7% below its $1,922.20 all-time high. Commenting on the gold market, analysts at Commerzbank wrote in a note to clients that “The price of gold has not really profited from the growing uncertainty,” in recent weeks. Instead, the yellow metal has headed lower alongside assets viewed as relatively risky and has traded inversely to the U.S. dollar.

Dennis Gartman, the long-time commodities investor and publisher of The Gartman Letter, offered a similar but more cautious perspective on the gold price. “Given the severity of the break in mid-September, if the gold market was still technically healthy it should have bounced sharply back, regaining that which it had lost rather swiftly,” he wrote. “Taking twice or three times as long to regain only a third or so of what had been lost seemed at least awkward and at worst bearish,” Gartman contended.

Gold’s sell-off coincided with a rebound in the U.S. Dollar Index

2011-10-20T07:32:00.000+08:00

The gold price oscillated near $1,650 Thursday morning. Rumors out of Europe that its leaders were prepared to expand the size of the European Financial Stability Fund (EFSF) have led to increased volatility in gold prices as well as in the broader stock and commodities markets. The UK-based Guardian reported that France and Germany are ready to approve a 2 trillion euro rescue fund for Europe and its ailing banking system.

Gold’s sell-off coincided with a rebound in the U.S. Dollar Index (DXY), which recaptured the large majority of its earlier losses to trade down by just 0.1% at 77.091 this afternoon. The euro currency, which had been higher by as much as 0.8% at 1.3869 against the greenback, turned lower by 0.1% to 1.3741.

Higher than expected reading on inflation gave traders a key reason to sell investments tied to the gold price

2011-10-19T07:38:00.003+08:00

The gold price sunk $14.98 to $1,655.54 per ounce Tuesday morning after a key reading on U.S. inflation came in substantially above expectations. The price of gold hovered near $1,660 in overnight trading, but dropped to as low as $1,634.90 after the Labor Department reported that the Producer Price Index (PPI) rose 0.8% on a seasonally adjusted basis. The gain was noticeably above the 0.4% consensus estimate among economists, and marked the largest monthly increase since April of this year.

The higher than expected reading on inflation gave traders a key reason to sell investments tied to the gold price, as higher inflationary risks are likely to reduce the likelihood of further monetary easing from the Federal Reserve. The core PPI rate, which excludes food and energy costs, came in at 0.2%, above the 0.1% rise expected by economists. The U.S. dollar inched higher against a basket of foreign currencies following the PPI data, which also helped to pressure the price of gold.

Steffen Seibert, a spokesman for German Chancellor Angela Merkel, stated that while an enhanced set of measures will be agreed upon at the European Union summit on October 23, the benefits of such plans will take quite some time to materialize. The measures discussed are “important steps on a long journey,” Seibert contended, “a journey that will certainly continue well into next year.”

Investors used the comments, along with last week’s rebound in stocks and commodities, as sufficient reasons to liquidate positions on Monday. As for the gold price specifically, UBS analyst Edel Tully wrote in a report to clients that “Too much uncertainty remains in the market with questions over issues such as guarantees of European sovereign debt, a Greek default and debt sustainability.”

However, Tully went on to offer a more neutral short-term outlook on the price of gold. Although “there is no rush to buy gold here, it is equally clear that investors who are long the yellow metal are not willing to let go of holdings either,” she contended.

The rally in the price of gold and broader markets was fueled by a sell-off in the U.S. dollar

2011-10-18T08:59:00.003+08:00

The gold price, at $1,684 per ounce, hovered near unchanged Tuesday morning. After trading as high as $1,695 overnight, the price of gold retreated after German Chancellor Angela Merkel’s chief spokesman, Steffen Seibert, warned that a quick ending to the sovereign debt crisis in Europe was not forthcoming. S&P 500 stock futures turned down on the news while cyclically-sensitive commodities, such as oil and copper, pared their gains.

The rally in the price of gold and broader markets was fueled by a sell-off in the U.S. dollar, particularly against the euro. The euro climbed from near 1.36 to 1.3870 against the dollar last week amid reports that European policymakers are considering an expansion of bailout funds to help recapitalize the euro zone banking system. Speculation that the International Monetary Fund (IMF) may play a larger role in the efforts also arose in recent days. Any increase in the level of financial assistance would inherently involve additional money printing, and thus provide a more favorable environment for the yellow metal.

Despite its advance, the spot price of gold remains 12.6% below its $1,921 all-time high print, recorded on September 6, 2011. Commenting on the yellow metal’s correction over the past month, Tony Hall of Duet Commodities Fund stated in a recent Bloomberg interview that “the decline is more of a healthy retracement” than a change in the long-term trend. ”I do think the trend is still in place,” Hall asserted, “and in the next three to six months we’re going to reach the $2,000 mark.”

Malaysia Retail 916 Gold Price Support At RM189/g

2011-10-17T08:05:00.003+08:00

Malaysia 916 gold price have supported at RM189/g almost a week already. The demand on gold in Malaysia is not high but China and India is buying most of the gold from the world.

Gold prices moved higher overnight and maintained their gains

2011-10-15T08:29:00.003+08:00

The gold price rebounded Friday morning, gaining $12.47 to $1,680.54 per ounce in spite of a better than expected report on U.S. retail sales. Silver climbed alongside the price of gold, advancing 1.9% to $32.42 per ounce. Strength in gold and silver prices was fueled by modest weakness in the U.S. dollar, which lost 0.3% against a basket of the world’s leading currencies.

Gold prices moved higher overnight and maintained their gains after the Commerce Department reported that retail sales rose by 1.1% in September. The increase exceeded the 0.7% consensus estimate among economists and marked the largest increase in seven months. Additionally, retail sales in August were revised higher to 0.3%.

This morning’s move higher in gold prices – despite the positive retail sales data – provided further evidence that the gold continues to “act like a hybrid of a risk asset and a safe haven,” as analysts at UBS wrote in a note to clients earlier this week. While the gold price displayed its safe haven attributes for much of the summer months, since early September it has traded much more like a dollar-denominated commodity.

“This has made trading the gold very challenging, as while one can have a view on an event such as U.S. payrolls for example, deciphering how gold reacts has become a lot more difficult,” UBS contended. “While buyers are nimbly returning, it is no surprise that there is caution given the struggle for conviction.”

Looking ahead to later this morning, a possible catalyst for the gold price is the University of Michigan Consumer Sentiment report. Economists are forecasting a slight increase from last month’s 59.4 reading, to 60.0 in October, fueled in part by the recent rebound in U.S. equity markets. If the data comes in ahead of expectations, the gold price could face selling pressure as investors move into riskier asset classes. Alternatively, if the report disappoints, the gold price could surmount an attack on the $1,700 per ounce level.

Average gold price targets were $1,635 in 2011, $2,080 in 2012, and $2,200 in 2013

2011-10-14T08:23:00.004+08:00

The gold price slid back below $1,670 per ounce Friday morning after U.S. weekly jobless claims came in modestly ahead of expectations. Silver retreated alongside the gold price, by $0.53, or 1.6%, to $32.08 per ounce. In the currency markets, the U.S. Dollar Index advanced 0.2% to 77.20, while the euro fell 0.4% to 1.3731 against the greenback.

“After trading sideways in June, gold rallied sharply through July and August,” strategists led by Anne-Laure Tremblay wrote. ”The increase was largely due to safe haven demand, triggered by doubts about whether the US would raise its debt ceiling. S&P’s downgrade of US debt and heightened sovereign issues in the Eurozone further increased risk aversion.”

Tremblay went on to note that “On 6 September, gold reached a peak of US$1,920/oz. However, sentiment soon reversed, and the price subsequently lost 20%, briefly touching US$1,535/oz on 26 September. It has since recovered to US$1,670/oz. Just as in October 2008, the recent drop appeared to reflect sales of gold offsetting losses in other asset classes triggered by extreme risk aversion.”

BNP subsequently stated that “We have revised our gold price forecasts. We now expect the price to average US$1,730/oz in Q4’11 before moving higher to US$1,950/oz in 2012 and US$2,125/oz in 2013.”

The firm’s previous average gold price targets were $1,635 in 2011, $2,080 in 2012, and $2,200 in 2013.

“Our main assumptions are unchanged. We see the gold price peaking in 2013, as the market starts to anticipate monetary tightening in the US, but do not expect a sharp fall thereafter. In the short term, a further correction is possible but this is not our central scenario. The main downside risk may lie with another round of extreme risk aversion, which could spark broad-based liquidation, as in September.”

Price of gold was fueled by a decline in the U.S. dollar against a basket of foreign currencies

2011-10-13T07:36:00.003+08:00

The gold price climbed $16.51, or 1.0%, to $1,678.76 per ounce Wednesday afternoon amid a broad-based rally on Wall Street. Strength in the price of gold was fueled by a decline in the U.S. dollar against a basket of foreign currencies. The SPDR Gold Trust (GLD), a proxy for the gold price, rose $1.43, or 0.9%, to $163.53 per share.

Commenting on the gold price, RBC Capital Markets senior vice president George Gero wrote in a note to clients that “We believed a higher trading range [was] imminent after $1,675 as better momentum, higher volume, higher moving averages and higher open interest came into play.”

In recent weeks the correlation between gold and other asset classes – particularly the U.S. dollar and euro currency – have noticeably changed.

While the gold rallied alongside the dollar as a safe haven for the majority of the summer, over the past month it has traded more in line with the euro currency as a riskier commodity.

Analysts at UBS elaborated on these developments in a note to clients on Wednesday.

“Gold has stepped into new territory, acting like a hybrid of a risk asset and a safe haven, as it tries to find a balance between the two opposing forces,” the firm wrote. ”This has made trading the gold very challenging, as while one can have a view on an event such as U.S. payrolls for example, deciphering how gold reacts has become a lot more difficult.”

UBS added that ”While buyers are nimbly returning, it is no surprise that there is caution given the struggle for conviction.”

Forecasted that the price of gold will average $1,875 per ounce in the fourth quarter of 2011

2011-10-12T07:48:00.003+08:00

The gold price retreated on Tuesday, falling nearly 1.1% to $1,661 per ounce. Risk aversion rose across the globe, leading to lower stock and commodity prices. Oil and copper prices fell 1.2% and 3.5% to $84.35 per barrel and 3.24 per pound, respectively. Investor concerns spiked over Europe’s debt crisis this morning as Slovakia, the only country to fail to ratify the new version of the bailout fund, was set to vote. Silver, off 1.5% to $31.49 per ounce, fell alongside the price of gold.

The euro’s rise was fueled by reports that German Chancellor Angela Merkel and French President Nicolas Sarkozy would finalize a “comprehensive response” by the end of the month that involved boosting capital levels of European banks. While equities and cyclical commodities advanced on the news, speculation that the European Central Bank (ECB) may also be forced to print additional sums of money to lend to banks helped support the gold price.

Commenting on the gold price, Barclays Capital said in a report on Monday that “Heightened uncertainty over the state of the global economy, and Europe in particular, provide a gold-fertile backdrop and we retain our positive view on gold.” The firm forecasted that the price of gold will average $1,875 per ounce in the fourth quarter of 2011, and $2,000 per ounce in 2012.

Barclays’ bullish stance echoed recent commentary from long-time commodities investor Dennis Gartman. The publisher of The Gartman Letter wrote last week that “Fundamentally it will be the disdain for fiat currencies generally that will push gold prices higher, and as the market understands that the only way out of the situation that Europe has gotten itself into is via inflation that will inure to gold’s benefit.”

In the shorter-term, Gartman contended that for the gold price to resume its “concerted, unfettered bull market,” it would need to make a convincing move back through the $1,650-$1,655 level.

Gold is likely to rise to a new all-time as investors continue to safeguard their wealth in an environment of declining economic growth

2011-10-11T07:34:00.003+08:00

The gold price surged higher Monday, rising $39.00 to $1,677 per ounce. Weakness in the U.S. dollar, spurred by healthier risk appetites amongst investors, propelled the price of gold. The euro rose against the greenback following a pledge this past weekend from French and German leaders to do whatever is necessary to prevent a banking crisis. S&P 500 stock futures climbed 15.40 to 1170.30, which crude oil rose 2.2% to $84.80 per barrel.

While the gold price has remained in a correction mode over the past month, many precious metals strategists see the yellow metal resuming its advance in the months ahead. The latest firm to raise its gold price forecast was Morgan Stanley, which predicted that gold will be the top-performing commodity in 2012.

The price of gold is likely to rise to a new all-time as investors continue to safeguard their wealth in an environment of declining economic growth, according to Morgan Stanley’s Hussein Allidina. The firm raised its 2012 gold price target by 35% to $2,200 per ounce, and said it could reach $2,464 in a “bull-case” scenario. As for silver, Morgan Stanley lifted its target to $50 per ounce.

“With macro headlines threatening demand across the complex, we have become more selective about commodity exposure,” Allidina contended. “Gold and silver are our top commodity picks heading into 2012.”

“Gold, and silver to a much lesser extent, are viewed as safe havens and stores of value as well as the closest thing to a global reserve currency,” he added. Gold “has been the most resilient in past recessions.”

Looking ahead to this week, there are several key economic reports likely to serve as catalysts for the gold price. The Fed minutes – a recap of the most recent FOMC meeting – will be released on Tuesday, followed by weekly jobless claims on Thursday. The week concludes with retail sales and University of Michigan Consumer Sentiment on Friday.

Malaysia Retail Price Update

2011-10-10T08:05:00.002+08:00

916 gold price hold on RM189.0/gm

Demand for physical gold continues to be very, very strong. China was off all this week

2011-10-08T08:47:00.002+08:00

The gold price held firm near $1,638 per ounce closing this week despite the better than expected U.S. employment report. The spot price of gold climbed to as high as $1,665.20 in overnight trading and remained in positive territory after the release of the September non-farm payrolls report. Silver prices headed north alongside the gold price, advancing $0.59, or 1.8%, to $32.59 per ounce.

The September jobs report showed that non-farm payrolls increased by 103,000 in September, well above the 60,000 consensus estimate among economists. The unemployment rate remained at 9.1%, in-line with expectations. The August non-farm payrolls figure was revised higher by 57,000, which also fueled optimism that the U.S. labor market is not deteriorating as significantly as many economists and investors had expected.

Commenting on the outlook for the gold price, MKS Finance head of trading Afshin Nabavi stated, via Reuters, that “What you’re seeing is demand for physical gold continues to be very, very strong. China was off all this week. They’ll be back next week and I presume demand will only increase, so I think that is why the market has held so nicely around this $1,600 mark.”

Earlier this year the gold market “was extremely bearish in the dollar and extremely bullish on Gold,” Nabavi added. “It’s not a one-way street all the time. We needed a correction and don’t forget we are talking about less than $300 in a commodity that was priced close to $2,000.”

He went on to say that “I still wouldn’t mind seeing it have a bit more of a correction on the downside first to clean up some of the spec length over the market.” Looking toward the end of 2011, Nabavi predicted that the gold price will resume its march toward $2,000 per ounce.

Gold price stabilized near $1,650 per ounce Friday morning after weekly jobless claims in the U.S.

2011-10-07T07:45:00.003+08:00

The gold price stabilized near $1,650 per ounce Friday morning after weekly jobless claims in the U.S. came in roughly in-line with expectations at 401,000. The spot price of gold climbed to as high as $1,656.10 earlier this morning, but pared its gains heading into the open of U.S. equity markets. In contrast to the gold price, silver climbed $0.27, or 0.9%, to $30.76 per ounce.

Analysts at UBS echoed this sentiment in a note to clients. “Separating itself from negative influences is by no means a straightforward endeavour for gold and volatile price action is clearly going to persist,” the firm wrote. “Yesterday’s moves highlight the difficulty of making sense of the gold market in the current shaky environment.”

Earlier this week, UBS lowered its 1-month and 3-month gold price targets by 9.0% and 7.1%, respectively, to $1,775 and $1,950 per ounce. “Our core bullish view on gold remains unchanged and the light nature of [speculative] positioning is a big positive, but our previous one-and three-month [prices]…are overly ambitious given the recent slowdown in market momentum,” the firm argued.

Looking ahead to the remainder of the week, Friday’s U.S. non-farm payrolls report is likely to serve as a key catalyst for both the gold price and broader financial markets. The consensus estimate among economists is for a 50,000 employment gain, while the unemployment rate is expected to remain at 9.1%.

With the August jobs report showing a disappointing figure of zero jobs added, another worse than expected reading could raise the pressure on the Federal Reserve to further expand its suite of easy monetary policies. The gold price would be a clear beneficiary in such a scenario. Alternatively, a better than expected non-farm payrolls report would likely reduce the odds of additional accommodative policies and thus present a headwind for the price of gold.

Recent gold price correction has been “healthy”

2011-10-06T07:41:00.002+08:00

The gold price stabilized near $1,640 per ounce Wednesday night despite a better than expected report on the U.S. labor market. The price of gold moved down to $1,597 in overnight trading but rebounded early this morning as the U.S. dollar turned lower against a basket of foreign currencies. The ADP employment report revealed that 91,000 private sector jobs were added in September, above the 75,000 consensus estimate among economists.

In light of the recent gold price weakness, Macquarie Capital Markets analyst Stephen Harris published a report this week discussing his outlook for the yellow metal. The gold price sell-off “has caused some speculation that gold’s bull-run is complete and that this reversal will soon continue,” Harris wrote. “We disagree. We see the recent pullback as healthy and believe a confluence of factors have combined to create the ~15% decline from its highs.”

Harris’ view that the recent gold price correction has been “healthy” was based on several factors – including the fact that sentiment had reached a “bullish extreme” in early September and a consolidation was needed; “the flight to the US dollar has meant the recent pullback been far less severe in other currencies”; investor withdrawals from the GLD and general commodity funds “have likely created another headwind”; and that an increase in gold margin requirements amplified the impact on speculators, which led to excessive selling.

Despite the aforementioned headwinds, Harris reiterated the firm’s longer-term bullish gold price outlook. “We see US short rates remaining at current levels through 2015,” he wrote, during which time the price of gold has historically risen at a 25% annual rate. Additionally, “sovereign risk and the related use of unconventional monetary policy should keep investors wary of their world’s major currencies – the euro, dollar, and yen. Concerns will ebb and flow, but these issues are not going away any time soon.”

“We see little downside” for the gold price below $1,500 per ounce, Harris added. “Doubts will continue over the future of the euro, European debt defaults, and ultimately, debt monetization.” In terms of specific gold price targets, Macquarie reiterated its 2011-year end and 2012 estimates of $2,000 and $2,500 per ounce, respectively.

Gold typically declines when the major economies are in recession; it happened in 2008

2011-10-05T07:47:00.004+08:00

The gold price dipped Wednesday morning, sliding $28.30 to $1630.40 per ounce on the back of continued liquidation pressures in global financial markets. The 0.5% drop in the price of gold occurred alongside broad-based weakness in commodities. WTI crude oil led to the downside, dropping 2.6% to $75.58 per ounce while copper declined 1.5% to $3.10 per pound. Worries over the prospect of a double-dip recession intensified this morning as the S&P 500 fell into bear market territory, dropping 20% off this year’s high. The flight away from riskier assets such as equities continues to benefit U.S. Treasuries, evidenced by the 10-year yield falling to 1.63% early Tuesday.

Despite Monday’s rally, the spot price of gold remains 14.0% below its $1,922.20 all-time high. Commenting on the gold price weakness, Dundee Securities chief economist Dr. Martin Murenbeeld wrote in a note to clients that “Gold typically declines when the major economies are in recession; it happened in 2008 and it happened in 1974-75 when the second-worst post WW-II recession hit. Gold was in a major bull cycle in the 1970’s (a cycle which ended in the second half of 1980 when Fed Chairman Paul Volcker pushed interest rates to record highs). But the 1974-75 recession caused gold to pull back 47% peak to trough, smack in the middle of that cycle.”

Murenbeeld went on to say that “We do not believe this cycle is finished for gold. We do however think that gold will now require some help from European (and US policy) to move significantly higher again.” As for specific policy measures, Murenbeeld predicted that there is an 80% chance Europe will “cobble together” a more robust set of measures to combat the sovereign debt crisis.

One alternative would involve levering up the European Financial Stability Fund (EFSF) in order to provide substantially more financial assistance to troubled euro zone nations and the European banking system. Although he did not suggest a particular size, Murenbeeld noted that last week that the price of gold jumped amid rumors that the EFSF could be expanded to €2 trillion. Given that such a move would inherently involve significant amounts of fiat money creation, Murenbeeld contended that the gold price would clearly be a prime beneficiary of such actions.

Gold weakness and the strong level of dip-buying that remains in two key emerging markets

2011-10-04T07:39:00.002+08:00

The gold price advanced over 2% Tuesday morning, climbing $48.90 to $1,669 per ounce. The price of gold has been mired in a correction that at one point wiped away over 20% of its value. Since touching $1,533 per ounce on September 26, gold has bounced over 8% to its current level above $1,650 per ounce. Heavy liquidation in the broader stock and commodity markets, as well as rumors of outsized hedge fund selling, has pressured the Gold.

While last month’s sell-off in gold may have rattled many investors, that has not been the case in China, at least according to Scotia Mocatta.

In a note to clients on Monday, the firm discussed the Gold weakness and the strong level of dip-buying that remains in two key emerging markets.

“Over the past 2 weeks commodities, including gold, have been in the crusher, although to be fair losses in non USD currencies have been significantly less than those that have been suffered at the hands of the strong USD,” analysts at Scotia Mocatta wrote. ”Although the ranges have been more vicious than normal this type of trading pattern has been seen many times before i.e. ETFs lose inventory and people liquidate profitable positions in gold to cover off margin calls elsewhere but when all is said and done the gold as a currency players and the gold as a physical store of value buyers use these ‘dips’ as ideal buying opportunities and this is exactly what has happened and is happening yet again in the gold market.”

The firm went on to note that “Physical into Asia (China) continues to be as strong as an Ox and with Diwali due to fall on 26th October this year India will not be far behind. Couple that with a nervous end / beginning to the quarter and it’s no wonder that gold is back at $1660 as I write and more importantly leading the way on the crosses with strong recoveries across the board.”