China Hold Hundreds of Billions of DollarsIn US Government Debt Make Gold Price Drop Strong



Gold prices try to broken USD 1,000 unsuccessfully so it will enter a price correction and now the support line will be at USD 960.

That is a critical issue for countries such as China that hold hundreds of billions of dollars in US government debt. If the United States is unable to control its long-term deficits, it could weaken the dollar and drive up inflation, hurting the value of those dollar-denominated assets. US Treasury Secretary Timothy Geithner, on his first visit to China as Treasury chief this week, announce sought to reassure Beijing that the United States was committed to living within its means.

Gold prices were up this morning, but when that announcement hit the market, the US Dollar (still the national currency, but probably not for long) rose nearly 100 basis points to 79.459 (moments ago) due to the sources in China, Japan, India and South Korea told Reuters central banks in those countries, which together control about half of the world's foreign exchange reserves, would keep buying US government debt even if the United States' sovereign credit rating were cut.

Gold will need 2-3 days to digest this blow, but were so strong leading up to this that it's hard to imagine they will enter a long correction. The gold price needs to protect USD960, USD941.50 at least. Remember also that the gold price was nearing big resistance at USD1,000 so a correction was likely to happen.

Whether this will turn into a longer dollar rally and longer metals correction, we will see.

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also wai...
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad ...
Read more

The price of gold advanced as high as $1,603.40 per ounc

Image
The gold price broke out to a new all-time high above $1,600 per ounce Monday morning, rising for the eleventh consecutive trading session. The price of gold advanced as high as $1,603.40 per ounce before backing off to trade just the $1,600 level. The yellow metal gained on the back of a surge in borrowing costs for Italy, the latest European nation to see its bond market come under heavy selling pressure. The lack of a deal to raise the $14.3 trillion debt ceiling also helped boost gold prices. The eleven-day rise in the gold price is the longest winning streak since January of 1980. The gold price delivered another noteworthy performance last week, climbing 3.2% on its way to a series of fresh record highs. With Monday’s advance, the gold price extended its monthly and year-to-date gains to 6.6% and 12.5%, respectively. Last week’s two-day Congressional testimony by Chairman Ben Bernanke on the economy and monetary policy revealed that the Fed remains open to the...
Read more