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

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.

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 waiting
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