Tag Archives: gold price analysis

Oct 26

Price of Gold Weekly Recap – October 22-26, 2012

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Monday Open: $1,729.50
Weekly High: $1,729.50
Weekly Low: $1,699.50
Friday Close: $1,1712.00

The gold market was pretty quiet this week, taking a few ups and downs based on market pressure, a Federal Reserve meeting and continued expectations about global stimulus measures. No major price shifts occurred; instead, gold operated within a pretty stable trading range, only dipping slightly below $1,700 midweek on Fed fears, but quickly regaining to the above $1,700 range. The major news this week was a statement released by the Federal Reserve that confirmed stimulus measures but did not announce any new policies.

Monday and Tuesday’s trading were basically fear-based sell-offs anticipating the Fed’s statement, compounded by a stronger dollar and outside markets. There was not great anticipation for the Fed’s meeting minutes, and economists generally didn’t expect any fresh stimulus measures, but there was a slight fear that since the dollar has been performing well lately, the Fed could decide to pull back their monetary easing at any time.

The euro dropped Tuesday as Moody’s downgraded Spain’s credit rating once again and reports said Spain’s economy contracted .4% more than last quarter. The dollar was also trading higher on Tuesday as gold hit a new 6-week low.

Once the Fed statement was released on Wednesday, gold jumped about $7 on the news that the Fed will be continuing its economic stimulus measures. However, it dropped all the way below $1,700 a few minutes later, after people had time to read through the FOMC minutes. The Fed reiterated its plan to stick with zero percent interest rates until 2015, despite gains already perceived in the housing sector.

Thursday saw gold rise on expectations that the bank of Japan may be considering stimulus measures, a rising euro and anticipation of the wedding season in India, which begins mid-November.

Friday was a slow day in the market, characterized by risk-off trading before the weekend. France got their credit score downgraded and Greece faced fresh economic woes; the gold season has started in India; and the U.S. reported slight gains in economic growth, strengthening the dollar.

Significantly, news has been traveling that Ben Bernake would probably not be running for office as Federal Reserve chairman for another term even if President Obama is reelected. This causes some concern for gold bugs, as Bernake is central to keeping interest rates low, an asset for gold.

“Without Bernanke, monetary stimulus from the Federal Reserve could be greatly reduced, and that will weigh on the price of gold,” said Jeffrey Sica of billion-dollar investment agency SICA Wealth.

The U.S. presidential election weighs in on many traders’ buying patterns, along with the anticipation of a “fiscal cliff” as it is being called: if Congress doesn’t solidify a debt reduction plan by the end of the year, a series of automatic spending freezes and tax increases will be enacted.

Oct 19

Price of Gold Weekly Recap – October 15-19, 2012

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Monday Open: $1,737.30
Weekly High: $1,752.20
Weekly Low: $1,718.00
Friday Close: $1,720.80

Gold opened on a one-month low this week, rallied upwards, then shot back down to close bearishly on a newer one-month low due to global economic pressures. There are a few global factors that contributed to the spikes this week, but as a whole gold is still operating at roughly $200 higher than the $1,500-$1,550 range that dominated most of the first half of 2012.

In a weak global economy, gold acts as a hedge fund and has been on the upswing for the past four years, largely due to economic restructuring of major economic states, not least of which has been the U.S. Federal Reserve’s easy monetary policies. Monday, however, China was on the forefront of traders’ minds, and gold dipped down from the weekend because data revealed that China, whose growth has been slow over the year, though still significantly ahead of the U.S., might not be considering economic restructuring if they can help it. Gold has risen in the past few months in large part due to America and Europe’s monetary loosening, and the same has been expected for China, but September data showed that China’s inflation rate dropped from 2% to 1.9% and their imports grew by 2.4%. This means uncertain trading for gold.

“The bottom line is China’s in this kind of gray area where…things aren’t as good as people want them to be but they’re not bad enough to continue to just throw money at the market,” Matt Zeman of Kingsview Financial said.

Tuesday, gold responded well after the U.S. released positive news on consumer price data, confirming that there is no current threat of significant inflation. If inflation were to appear on the horizon, the Federal Reserve may change their policies to curb price hikes, which would negatively affect gold. Without immediate fear of inflation, the Fed can continue its trend of monetary easing. The dollar also slipped a little compared to other currencies.

However, Wednesday reports on U.S. housing data served to balance out any permanent feeling of comfort regarding the dollar. Housing data was positive, implying that if that trend continues, the Fed may start to slow down their stimulus plans. Spain also received some important news; the struggling country’s credit rating was left unchanged rather than downgraded, and there is still talk of Spain requesting a bailout. Germany also joined the conversation by announcing a lower economic growth rate for 2013 than previously anticipated.

Gold traders anticipated Thursday as results from China’s third-quarter gross domestic product would be released and the European summit would begin. Data from China on Thursday confirmed the foreshadowing from Monday that China may not be as strongly considering economic boosting, since the outlook is good for economic growth.

Friday dropped gold back down below the initial trading point on Monday to a fresh one-month low. The dollar was trading higher on Friday, and the European summit meeting ended, revealing no news from Spain that the country would be asking for a bailout now. Economic uncertainties in all parts of the world contributed to an overall precarious feeling for unconvinced gold traders, causing many to flee the market by the end of the week.

Frank McGhee, precious metals trader of Integrated Brokerage Services LLC, put it this way: “People who rushed in for QE expecting to get a significant lift are getting out of the market.  The longer we don’t make a new high, the more people start getting nervous about where gold is trading.”

This week experienced a 2% drop in gold, the largest weekly decline in four months.

With noncommittal leaders in Spain, a U.S. election on the horizon, a stronger Chinese economy and the season for gold buying in India approaching, yet with a weak rupee, gold seems to be caught once again in a trading limbo. However, once the price of gold breaks $1,800, interest in this precious metal will surely return, as many investors see the yellow metal continuing to perform well in the long-term.

Sep 28

Price of Gold Weekly Recap – September 24-28, 2012

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Monday Open: $1,764.50
Weekly High: $1,782.50
Weekly Low: $1,739.00
Friday Close: $1,774.70

 

Gold stayed in a pretty neutral trading range this week with a slight dip occurring in the middle of the week. Some investors expected gold to break the $1,800 bubble this week, but it didn’t happen; instead, gold experienced some trade offs and a reaction to the European financial dilemma in Spain.

Monday opened slightly lower after investors started taking profits over the weekend in response to news of lower crude oil and grain prices. Tuesday saw gold holding strong despite positive U.S. economic data, most likely because of the breakthrough news a couple of weeks ago that the Federal Reserve would be implementing some new fiscal policies that would inevitably boost inflation, and therefore a safe haven in gold. So, even with slight bursts of good news for the dollar, employment or the housing market, gold has the Federal Reserve’s policies to lean on for growth.

The dip that occurred on Wednesday was a risk-off move by traders responding to protests in Spain and Greece against the countries’ austerity measures, a sign that the European debt crisis is once again on the world economy’s radar. There are some worries that the European Union may back down from some of the policies reached during the summer.

Yet, Thursday took a U-turn upwards when Spain announced a new program of spending cuts and tax increases, indicating they may want to borrow money from neighboring economies. For a long time, speculators have been waiting for Spain to ask for bailout money from the European Central Bank, and some see this is a positive sign. This pushed gold up $26.80.

Additionally, China is not necessarily thriving, and many hope that China will embark on economic measures to boost its economy. The bottom line is that no powerhouse world economy has a strong currency right now, and this is the number one reason why gold is reaching the heights that it is.

“If you put together stimulus on three continents … that’s a good inflationary outlook,” George Gero, of RBC Global Futures, said.

Finally, gold ended the week a little lower due not to external forces, but to a wrapping up of the week and the third trading quarter. Investors took their gains from a lucrative quarter, which experienced a tremendous growth of 11% in the July through September period. This was the yellow metal’s biggest quarterly gain in two years, largely fueled by Fed policies.

Sep 21

Price of Gold Weekly Recap – September 17-21, 2012

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Monday Open: $1,762.50
Weekly High: $1,786.70
Weekly Low: $1,755.30
Friday Close: $1,773.00

Coming off of last week’s immense gains, gold showed considerable strength this week, staying in the $1,750 – $1,780 range and then jumping to its highest peak of 2012 on Friday. Last Thursday gold reached the highest price of the previous in six months after the Fed announced further monetary easing in order to curb unemployment, and this week, it was upon speculation that Spain, a country already unstable financially, might reach out to take on monetary assistance from other European countries that caused the subsequent rally.

Amidst the global financial crisis, gold performs excellently because it is seen as a hedge fund against inflation and weak paper currency. Even though last year saw gold reach an unprecedented $1,900 per ounce (compared to $300 per ounce in 2003), speculators who expect to see gold surpass this benchmark this year are not uncommon. Especially after a slow summer and the recent upward trend for the precious metal, talk abounds of gold soon hitting $1,800, then $2,000, then eventually $2,400.

Analysts at Merrill Lynch wrote in a report that they expect to see gold reach $2,400 by the end of 2014. They also don’t expect to see gold dip below $1,500. “Given the new open-ended nature of QE3, the upward pressure on gold prices should continue until employment is strong enough to require a change in policy. In our view, this is unlikely to happen until the end of 2014,” the report said.

This is the Federal Reserve’s third stimulus program since the 2008 financial crisis, and consists of the government buying around $40 million of mortgage-backed debt each month to reduce consumer debt and boost the economy. Especially in conjunction with “Operation Twist,” which consists of the Fed buying a lot of short-term loans in order to cut down on long-term debt, this is a much more aggressive series of policy than most anticipated, which translates into good tidings for gold.

To sum up this week, Monday prices fell largely due to profit-taking, according to most sources. Profit-taking pressure and continued through Tuesday. On Wednesday, gold jumped slightly off of news that Japan was going to be enacting some new stimulus measures, including 10 trillion yen, or the equivalent of $128 billion, to buying asset funds. The U.S. dollar index was also weaker on Wednesday. Keep in mind, this is in addition to the European Central Bank’s announcement earlier this month that they’d be buying troubled E.U. bonds. Then on Friday, speculation that Spain would be undergoing further borrowing prompted one last move upward for the week.

Sep 01

Weekly Gold Price Recap – August 27-31, 2012

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Monday Open: $1,674.70
Weekly High: $1,692.40
Weekly Low: $1,653.80
Friday Close: $1,691.60

The entire week was spent in anticipation of Fed Chairman Ben Bernake’s address on Friday, so there was not much movement for gold until then, but once Bernake gave his speech, gold shot straight up after his remarks implied that monetary easing was surely on the horizon. After a slow summer of waiting for the Fed to reveal some clue as to their fiscal intentions, finally Friday brought some relief for gold bugs banking on gold investments taking even higher turns than last year. The beginning of the week until Friday morning saw the price of gold hovering around $1,650, with a few dips from hesitant expectations regarding Friday, and a few small upturns from poor economic data, but once investors got the green light from Bernake, gold peaked at just over $1,690.

With the U.S. economy still in a shambles, Bernake spoke Friday at the Fed’s annual retreat in Jackson Hole, Wyoming and gave clear intentions of boosting the economy with some financial policy.  The Federal Reserve has the power to increase government bond buying, lower interest rates, print more paper money and other economic incentives to keep the economy rolling. When this happens, the economy may see an upturn, but it is at the expense of increased inflation. When inflation increases, the dollar weakens, and gold becomes more valuable as a safer investment.

Though Bernake didn’t explicitly state what moves he was going to make, he did admit that further policy has become necessary since unemployment is still so high and the state of the economy is still “far from satisfactory.”

The European Central Bank is still on the fringe of economic recovery, and ECB president Mario Draghi cancelled his appearance at the Fed’s Jackson Hole meeting due to a heavy workload, he said. The ECB Governing Council will hold a meeting next week to discuss measures that could bolster the euro. The economic upheaval in Europe continues, this week with Catalonia, a region of Spain, asking for a bailout from Madrid. Also, EU unemployment rose to 11.3% in July. Eurozone troubles could strengthen gold.

Aug 24

Price of Gold Weekly Recap – August 20-24

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Monday Open: $1,618.80
Weekly High: $1,673.50
Weekly Low: $1,613.30
Friday Close: $1,670.30

Finally, after a long summer of stagnant gold prices, this week marked a three month high and a steady rise in gold after U.S. Federal Reserve and European Central Bank leaders indicated the easing of monetary policy that gold bugs had been hoping for since the first quarter of the year. Though still hovering below $1,700, while last year around this time gold was hitting the historical highs of $1,900, this week provided a lot of the solid clues investors have been waiting for on the gold front.

Monday was not especially remarkable in that trading stayed fairly sideways a little above $1,600, but Tuesday began the upswing that continued throughout the rest of the week. This entire summer, the U.S., European and Chinese governments have been under close watch by gold investors, since any recession-fighting tactics like printing more paper money or changing interest rates would weaken their currencies, thus strengthening gold as a hedge fund.

On Tuesday, after a few weeks of speculation about the ECB bailing out European countries, Spain  added $5.4 million to its debt at lowered costs from the ECB, which gives hope that the ECB will buy government bonds to keep costs low. Inflation drives up the price of gold. China also started injecting more liquidity, or offering low-rate loans to member institutions, which bolsters confidence in gold.

Wednesday marked a big day because after months of expectant anticipation that Fed Chairman Ben Bernanke would ease monetary policy with little concrete evidence, he finally provided the strong signal that gold hopefuls were waiting for.

According to the minutes from the meeting, Bernake stated, “”Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery.” This is a more substantial indication of policy to come than has been seen in the past months.

Gold jumped nearly $40 after the news, primarily launching upwards on Thursday as China, the U.S. and the European Union all seemed to strongly allude to recession-era measures to keep their economies afloat, which translates into greater safety in gold. While Tuesday hit a two-month high, Thursday broke the record with the highest point in four months.

Santa Monica precious metals broker Marin Aleksov calls this trifecta of economic bailout the “perfect storm” for gold.

Some are still pessimistic that any actual policy change will occur, based on Bernanke’s past ambiguity, and Friday saw a slight slowing down of the gold frenzy of the week to level off around $1,670.00. The significance of this week is simply that gold seems to have emerged from the limbo state it’s been stuck in for months.

Adam Sarhan, CEO of Sarhan Capital, commented optimistically, “Gold has this week broken out of its well-defined, multimonth downward trendline. That resistance which kept gold in a range in the last several months should become a new level of support, suggesting gold is not going down but going higher.”

Many believe an unprecedented bursting through the $2,000 mark is just around the corner for this precious yellow metal.

Aug 18

Price of Gold Weekly Recap – August 13-17, 2012

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Monday Open: $1,623.60
Weekly High: $1,623.60
Weekly Low: $1,591.10
Friday Close: $1,615.80

This week’s price of gold story unraveled too similarly to the one that’s been told every week this summer; investors are getting anxious at the lack of change in the market, yet are still mildly hopeful for an upcoming change of events. The three major factors that have kept gold in state of limbo for the first half of 2012 have not improved – the U.S. Federal Reserve has not eased monetary policy, the European Central Bank is slow to enact financial safety measures, and China and India have actually decreased their gold demand. This week saw some especially drab news in the world of gold investing, especially in terms of the global economy, but it was tempered by a new billionaire investor and a survey by Kitco that reports that gold bulls are still a majority.

Monday opened above the $1,600 mark, but that was the highest it would be all week. Early in the week, gold fell as bleak economic reports started tumbling in across the major nations. Japan, China, the U.S. and the European Union all reported economic stagnation without any concrete action to bolster paper reserves or otherwise buffer the commodities market. Gold rises as a hedge fund in relation to the dollar, the euro and commodities like oil, so the lack of movement in these realms translates to a lack of movement for gold.

Tuesday took a slight upturn after some fresh, weak U.S. economic data, but it didn’t last long. A slew of negative data started pouring in as the week wore on, including some statistics from the World Gold Council. According to this gold watchdog organization, gold dropped 7% in the second quarter compared to where it was last year at this time, and jewelry demand fell 15%. Alarmingly to gold bulls, 56% of this drop in gold demand occurred in India, which is well-known to be a powerhouse of gold consumption. A weak rupee and sluggish economic growth may have a hand in that. Also, it came to light on Tuesday that six more European nations are now in an official recession. With gold retreating for four quarters in a row, some may be asking: is the gold rush is over?

It’s hard to say, according to most speculators, but it does depend on a few factors, like central bank policy and the economic health of India and China. George Gero, vice president of RBC Global Futures, had this to say: “Unless we start to see some effect of stimulus, traders are concentrating on what is now. If traders can’t find something positive to point to, they tend to shy away from taking risks.”

And nothing drastic has changed in terms of Fed or ECB policy. The next meeting of the Fed is scheduled for August 31, but it’s hard to say whether any significant policy changes will be enacted. Still, this is the next date on the waiting list for gold investors.

Thursday and Friday saw an increase in the market, so that the week closed only about $5 below the week’s beginning.

But it’s still the same waiting game, and as the chief economist of precious metals trading company Degussa Goldhandel GmbH said, “The monetary affairs of the world probably play the most important role for gold prices going forward. The slowing economy will boost calls for easier monetary policy.” Depending on how central governments and banks respond, gold could see a green light ahead. Out of Kitco’s weekly respondents, 16 of 28 still feel optimistic.

In other somewhat positive news, billionaires George Soros and John Paulson increased their gold holdings, driving confidence to some in the market.

Aug 03

Price of Gold Weekly Recap – July 30-August 3

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Monday Open: $1,621.00
Weekly High: $1,625.40
Weekly Low: $1,586.30
Friday Close: $1,603.60

This week gold opened at a 6-week high, trailing off gains from last week’s European refinancing, and though the price of gold dipped lower as the week progressed, it still managed to close above the $1,600 mark. After last week’s 2.5% price jump due to news that the European Central Bank is prepared to give the economy a boost by printing more money (which will devalue the euro and send people to a safe haven in gold), Monday opened high but sank on Tuesday as many investors decided to opt out of gold and leave the market with the gains just made.

U.S. unemployment and job loss data was bleak early in the week, buffering gold losses, and the Fed gave an uneventful public address on Wednesday, which again confirmed no economic easing, though it did acknowledge economic sluggishness. Still, gold bulls are hopeful that the coming weeks will finally show some economic easing from the Federal Reserve.

By Thursday, gold had been on a 4-day downturn as both the U.S. and the Eurozone disappointed with a lack of concrete economic policy. Contrary to expectations, European Central Bank president Mario Draghi did not announce any monetary policy or interest rate changes. He addressed the public to say that any government bond buying wouldn’t occur until September, and only on certain conditions. Thursday dropped down to around $1,585 — $30 down from Monday.

“It appears that central banks now need more economic data for them to come out with more aggressive actions, and that’s disappointing for gold investors,” Phillip Streible said on the matter. He is the senior commodities broker at R.J. O’Brien, a futures brokerage.

Yet, gold rose a percentage point on Friday as the dollar buckled, more negative unemployment data rolled in, and investors once again began betting on Fed easing. This kept the yellow metal afloat above the $1,600 mark; although, the beginning of the week marked a 6-week high, the end of the week marked the biggest weekly drop in prices in the same time frame. Gold is still trapped in the $1,525 to $1,675 trading range, a long way from the year’s high of $1,781 in March, held captive mainly by the ambiguous remarks made on economic policy by Fed and ECB chairmen.

Jul 27

Price of Gold Weekly Recap – July 23-27

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Monday Open: $1,578.90
Weekly High: $1,626.70
Weekly Low: $,1569.10
Friday Close: $1,624.20

After weeks of a hesitant gold market driven by uncertainties surrounding the European debt crisis and continued lack of U.S. monetary easing, gold finally broke confidently above the $1,600 barrier this week when a series of reports started signaling a weaker euro ahead. Gold gained around $60 from the slow beginning of the week to a somewhat anticipatory closing, moving from the greatest inverse correlation to the dollar since January to the highest price of gold in more than a month.

Gold investors started out the week skeptical as the dollar reached a two-year high and gold stood at a -0.718 correlation with the paper currency, the strongest since the beginning of the year. Since gold trades inversely to the dollar, the yellow metal weakened as the greenback gained strength.

Worries over the Eurozone debt crisis continued to plague gold at the beginning of the week, but took a few surprising turns as the days rolled on. Tuesday started a very slight uptrend when Greece announced the country probably would not be able to pay its debts, indicating to investors there could be room for economic restructuring.

Then, Spain and France announced on Wednesday that the Eurozone would be adopting a common strategy to stabilize the euro, including enacting a supervisory mechanism on all euro area banks. This could mean that the European Central Bank could get significant and cheap funding, which could subsequently devalue the euro, thus elevating gold in a similar inverse fashion as the gold-dollar relationship. Sure enough, Wednesday saw gold reaching a two and a half week high after this news broke.

But it doesn’t end there.

Thursday continued the path of European restructuring and gold was bumped even higher after ECB president Mario Draghi proclaimed that he was ready and willing to take any steps necessary to float the euro. Specifically, “The ECB is ready to do whatever it takes to preserve the euro,” he said. Speculators can decode that as meaning that the bank will be inclined to print more paper money, which would inevitably reduce the strength of the currency and encourage investors to flock back to gold as an established safe haven.

Peter Schiff of EuroPacific Capital is one industry spokesperson who sees this as a major breakthrough for gold. The metal has been stuck in a limbo for a while, and Asian and Indian investors are still generally sitting on the sidelines as their economies stumble through some bumps this year. But while investors have been waiting anxiously for a signal from Federal Reserve chairman Ben Bernake that the U.S. would start printing more money, instead they got that confirmation from the European Central Bank regarding the euro, and it’s no small potatoes.

Schiff said on Thursday, “I’m surprised that gold is not rallying even more considering what’s happening.  Gold has now broken out of a channel.  There was a very nice trendline and we just broke out of that today.  Now that we have broken out of that channel, there is a lot of room to the upside.”

It should be an interesting time ahead for gold.

Jul 20

Price of Gold Weekly Recap – July 16-20

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Monday Open: $1,588.10
Weekly High: $1,596.50
Weekly Low: $1,569.30
Friday Close: $1,584.00

This week continued the typical holding pattern that gold has been experiencing since the beginning of the summer, following a few modest ups and downs but generally maintaining a steady balance, not straying not too far from $1,580 during this 5-day trading period. The major events of the week included anticipation of some change in Federal Reserve Chairman Ben Bernake’s economic policy, gains in the Indian rupee, a falling dollar and escalating conflicts in the Middle East.

Monday opened steady, with a weak dollar index, firm oil prices and news from China that their economy is still sluggish. Monday evening and Tuesday morning marked a slight rise in the price of gold to almost $1,600 (with some opting out of the market, as well), as bullish traders anticipated Bernake’s remarks on Tuesday afternoon. Despite the same story repeating itself over the past few months, where some clues indicate that Bernake may loosen U.S. economic restraints, thus burgeoning gold, he once again disappointed gold bulls on Tuesday with no concrete changes in financial policy. Compounding the disappointment was a slightly stronger dollar, and prices dropped to close lower on Tuesday.

Bernake spoke again on Wednesay, and true to pattern, said nothing on third quarter easing. Gold dropped slightly. Thursday revealed more weak U.S. economic data, spurring gold to climb back to its original state of around $1,580, and this foundation persisted through the end of the trading week. Friday saw slightly higher economic reports and a stronger dollar, but not enough to create a significant change in price.

Indian demand for gold is on the radar this week, as the rupee has been gaining strength and Indian traders, especially jewelers, are anticipating next month’s festival and wedding season. Gold is a tremendous part of Indian culture, especially special events and weddings, and though the rupee saw modest gains this week, Indian traders are still generally hanging out on the sidelines. Still, some analysts predict the price of gold to spike as much as 25% in the next month due to Indian demand.

In other news, a suicide bomber attacked a bus full of Israeli tourists in Bulgaria on Thursday, and late Wednesday, the Syrian defense minister was assassinated, heightening tensions in the Middle East. Any serious conflicts arising in the Middle East will likely spur a safety rush into gold, as well as increases in crude oil, which would also strengthen the precious metal.

With all these competing and mostly hypothetical factors influencing gold, the yellow metal seems to be stuck in a summer limbo. One report quoted Goldman Sachs as expecting gold to reach $1,840.00 per ounce in the next six months. As for now, traders are still waiting for U.S. policy changes, and Kitco’s weekly survey reported that participants are still pretty evenly split on the future of gold.