Concerns over the effectiveness over the latest round of Greek bailout funds drove investors into the gold

The gold price held steady near $1,780 per ounce Thursday morning despite better than expected data on the state of the U.S. labor market.  The price of gold climbed to $1,787 prior to the release of weekly jobless claims, but relinquished its gains after they came in at a four-year low of 351,000.  In doing so, jobless claims beat the 355,000 consensus estimate among economists and fell to their lowest level since March 2008. 

Concerns over the effectiveness over the latest round of Greek bailout funds drove investors into the gold price and U.S. dollar.  In a note to clients, analysts at HSBC stated that “Even assuming the new Greek programme proceeds as planned, the Greek government crisis is far from over.  This deal will help creditors to be repaid, as the funds will be channelled into an escrow account to ensure that lenders are prioritized, but it will not revive economic growth any time soon.” HSBC went on to say that “With the Greek economy now in its fifth year of recession and already having contracted in the fourth quarter by 7% year-on-year, even the revised debt sustainability analysis looks optimistic.”

Another factor underpinning the gold price rally was bullish commentary from Goldman Sachs.  In a report published on Wednesday, the firm reiterated his $1,940 target by the end of the year.  Analysts led by Jeff Currie wrote that “We expect US real interest rates to remain lower for longer given our US economics team’s expectation for US economic growth to remain slow through 2012.  Consequently, we expect gold prices to continue to rise through 2012, reaching $1,940 an ounce in 12 months, and we continue to recommend a long gold position.”

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