Ben Bernanke may continue to believe that gold is not money

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.”

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