Investors have been driven out of many risky asset

The gold price rose for the fifth consecutive session on Friday despite a further advance in the U.S. dollar.  The spot price of gold climbed by as much as $6.09, or 0.4%, to $1,739.34 per ounce in morning trading while the U.S. Dollar Index added 0.4% to 81.087.  In doing so, the gold price reached a three-week high while the dollar hit its best level since late August.

The recent strength in both gold prices and the U.S. dollar has coincided with a substantial risk-off phase in the broader financial markets.  Following Barack Obama’s successful re-election campaign, the focus in the U.S. has shifted toward the looming fiscal cliff.  When coupled with ongoing concerns over the European sovereign debt crisis, investors have been driven out of many risky asset classes such as stocks and commodities and into safe havens such as the yellow metal and greenback.
Standard Bank noted in a recent report to clients that “In spite of dollar strength, the (gold) market appears to continue to take comfort from Obama’s re-election and the implied support this gives to continued monetary accommodation from the Fed.”

Gold prices have also received a boost of late from growing demand in China, according to analysts at Commerzbank.  “Chinese demand for gold is set to grow by 1% this year [to a record] 860 tons on the back of increased jewelry demand and growing investment demand,” the firm stated, citing data from Thomson Reuters GFMS – the world’s largest metals consultancy firm.

Commerzbank also pointed to comments yesterday from European Central Bank (ECB) President Mario Draghi – who contended yesterday at the ECB’s monthly monetary policy meeting that its pledge to purchase sovereign debt of struggling euro zone nations has helped to stabilize the region – as helping lift the price of gold.  Draghi’s remarks helped raise the “expansionary degree of monetary policy,” the firm contended, which is “likely to spark concerns about inflation and keep demand for gold” strong.

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