Tag Archives: gold rising

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.

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.