Seasonal Slip for Gold

Yesterday was a bad day on the US markets and the price of PMs dropped as well. So far, today is not looking much better, but the Market has not opened yet as I am writing this. A Facebook friend asked, why the drop in PM prices? and was it a seasonal effect? I replied that I thought it was primarily due to the problems in Greece and the other PIIGS, which led to slide in the Euro and therefore, a relative increase in the strength of the dollar. As most of us know when the dollar is strong PM prices go down. Well, It may come to a suprise to most of you, but I do not know everything. I may have been partly wrong. According to an article on Forbes.com, Carl Gutierrez reported “the demand for gold has eased of late, but the cause may owe more to the calendar than the appetites of investors.”


Haytham Hodaly, senior precious metals analyst at Salman Partners, states that gold price is only returning to where gold typically rests this time of year, and assuming nothing else flares up, it should trade sideways to slightly lower, within a 5% range, until late-July. Demand is supposed to pick up again at that time from Asia, and as European countries seek to move out of the dollar and into hard assets. This seasonal relationship that has taken place 80% to 90% of the time over the last 20 years.

This seasonal phenomenon along with other factors such as a stronger dollar due to economic turmoil in Europe may be the cause of yesterdays drop in gold prices. I still believe that you should use the dip to stock up on PM's.  To read the Forbes.com article go here: http://www.forbes.com/2010/05/04/gold-metals-barrick-markets-equities-commodities-mining.html?feed=rss_markets