Since the economic situation in the EU was either better or less worrisome last weekend, many investors' felt that market trading was less risky. Therefore, traders tentatively sold gold for stocks. Global stock markets posted modest gains encouraged by the U.S. late-day rally on Friday.
There may be more volatility ahead for gold prices as they continue to take their cue from the risk trade. In the short term, a weaker US dollar could boost demand for gold as the dollar-backed commodity becomes an inexpensive purchase in other currencies; furthermore, any significant pullback could lure in any bargain-hunters looking to buy gold at a discount.
Even though Spain denied rumors last week that it would be the next EU nation to request bailout funds, sovereign debt risk from Spain is waiting in the wings as a gold provocateur. Even though the Spain's yields are on the rise. Bond yields typically rise when a government must sweeten the pot to entice investors to lend the country money. Currently, the yield on Spain's 10-year bond is 4.59% while Portugal's is 5.33%. These levels do not yet compare with Greece's double-digit yield at the height of its' financial crisis, but investors are still worried, and any bad news out of the eurozone would trigger a gold rush as investors buy the metal as a form of money that retains value when paper currencies fail.
Gold bulls are hoping that prices can reclaim and exceed their record high last week of $1,254 an troy ounce. However, gold set that record intraday and settled under $1,250 leaving many analysts wondering if there is any momentum to this gold is bullish movement.
For the Silverbugs and base metal buyers: Monday, silver prices were rising .18 cents to $18.42, while copper was rallying 8 cents to $2.99.
Showing posts with label stronger dollar. Show all posts
Showing posts with label stronger dollar. Show all posts
Monday, June 14, 2010
Wednesday, May 5, 2010
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
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
Thursday, April 29, 2010
Gold Rallies Against Western Sovereign Paper
Many people attribute gold’s rally to the possible collapse of the Euro; however, Lance Lewis, of Lewis Capital, a Registered Investment Advisor in Dallas wrote an article for Minyanville.com expressing his hypothesis. He thinks that gold is rallying in all the major currencies at the moment, providing further evidence that gold’s bull market isn't due solely to a weak dollar.
Lewis believes the reason gold is rallying now is more complex than just Portugal, Greece, Italy, and Spain’s (PIGS) sovereign debt problems and the decline of the euro. The real problem is with all the Western sovereign paper currencies including the US. When a monetary system breaks down, that leaves gold and other PMS as the only monetary refuge. The fact that gold prices continues to increase even as the dollar rallies against the euro and other debtor currencies tells us that the market see issues with the dollar in the future as well.
Lewis states that “even if there is a default in Europe and the ECB is eventually forced to flood the PIGS with euros (a lesson it learned from the Fed here in the US) that's when the market’s focus will then turn to the sovereign debt issues of the US and begin to sell the dollar and US debt.”
Gold investors need to look to the future and think ahead, if you look at countries with sovereign debt problems as dominoes, at the end of the line of dominoes is the biggest debtor of them all, the US. Once the market’s focus comes off the sovereign debt problems of the PIGS for a while, the sovereign debt vigilantes will simply then turn their guns on the US, and the market knows this. The gold market is finally thinking ahead (for once), and not waiting for the dominoes to fall.
To read Lewis’ article go here.
Lewis believes the reason gold is rallying now is more complex than just Portugal, Greece, Italy, and Spain’s (PIGS) sovereign debt problems and the decline of the euro. The real problem is with all the Western sovereign paper currencies including the US. When a monetary system breaks down, that leaves gold and other PMS as the only monetary refuge. The fact that gold prices continues to increase even as the dollar rallies against the euro and other debtor currencies tells us that the market see issues with the dollar in the future as well.
Lewis states that “even if there is a default in Europe and the ECB is eventually forced to flood the PIGS with euros (a lesson it learned from the Fed here in the US) that's when the market’s focus will then turn to the sovereign debt issues of the US and begin to sell the dollar and US debt.”
Gold investors need to look to the future and think ahead, if you look at countries with sovereign debt problems as dominoes, at the end of the line of dominoes is the biggest debtor of them all, the US. Once the market’s focus comes off the sovereign debt problems of the PIGS for a while, the sovereign debt vigilantes will simply then turn their guns on the US, and the market knows this. The gold market is finally thinking ahead (for once), and not waiting for the dominoes to fall.
To read Lewis’ article go here.
Wednesday, March 10, 2010
Gold and Oother PM's Start With a Bang then Fizzle Out-March 10, 2010
Gold prices started off slightly higher today on improving investor risk appetite. Gold for April delivery was rising to $1,122.40 at the Comex. Prices traded has high as $1,128.30 and as low as $1,120.50. The U.S dollar index was adding 0.03% to $80.62. Gold's spot price was rising 80 cents according to Kitco's gold index. Many investors were still waiting for a resolution on Greek sovereign debt, but a strengthening euro was helping gold prices. President Obama met with Greece’s Prime Minister Papandreou; however, Obama showed little support for Greece and gave no indications of financial aid.
The European Commission is working on a proposal for a monetary fund to assist struggling European countries, but Greece and Portugal have yet to officially ask for help. Hampering gold's morning rise was the news that China's imports rose by 44.7% last month, crimping its trade surplus. If China raises rates to put the brakes on its economy, many analysts believe that would impact gold prices negatively. Consumer demand for gold in China grew 7% from 2008 to 2009, totaling 462 tons. Initial buying interest has boosted gold somewhat as a result of the European Union debt news and currency fluctuations.
However, gold futures finished lower. According to MarketWatch, traders took a cautious approach ahead of more economic reports from China. Most precious metals sold off early in the session and failed recover during this session. No single reason was attributed to the move lower in precious metals, although a recovery in the dollar index did convince many to sell.
Gold futures are at lows not seen since February 25. Also, gold futures closed just below their simple 50-day moving average. April gold closed 1.3% lower by $14.10 to $1108.20, May silver closed 1.8% lower losing .028 to finish at $17.31 and May copper shed 4.35 cents to $3.368. Actively Traded Lagging Global & Sector ETF Plays: Silver- SLV -1.75%, Gold miners- GDX -1.50%, Gold- GLD -1.25%, Base metals- DBB -0.75% (COMDX).
The European Commission is working on a proposal for a monetary fund to assist struggling European countries, but Greece and Portugal have yet to officially ask for help. Hampering gold's morning rise was the news that China's imports rose by 44.7% last month, crimping its trade surplus. If China raises rates to put the brakes on its economy, many analysts believe that would impact gold prices negatively. Consumer demand for gold in China grew 7% from 2008 to 2009, totaling 462 tons. Initial buying interest has boosted gold somewhat as a result of the European Union debt news and currency fluctuations.
However, gold futures finished lower. According to MarketWatch, traders took a cautious approach ahead of more economic reports from China. Most precious metals sold off early in the session and failed recover during this session. No single reason was attributed to the move lower in precious metals, although a recovery in the dollar index did convince many to sell.
Gold futures are at lows not seen since February 25. Also, gold futures closed just below their simple 50-day moving average. April gold closed 1.3% lower by $14.10 to $1108.20, May silver closed 1.8% lower losing .028 to finish at $17.31 and May copper shed 4.35 cents to $3.368. Actively Traded Lagging Global & Sector ETF Plays: Silver- SLV -1.75%, Gold miners- GDX -1.50%, Gold- GLD -1.25%, Base metals- DBB -0.75% (COMDX).
Thursday, March 4, 2010
Article from TheStreet.com : Gold Prices Stall
Alix Steel
March 4, 2010
Gold prices were slipping today due to profit talking by PM investors, and a rise in the U.S. dollar index. The U.S. dollar rallied off of Euro weakness after the European Central Bank announced its decision to keep key interest rates low.
Currently gold's future is mixed, and one factor is the next employment report. A positive report could prompt the Fed to raise interest rates, which would likely impact gold prices negatively. Gold prices were also negatively influenced by Greek debt fears, new uncertainties created volatility for the Euro and gold.
Mining stocks, were also such as Barrick Gold, Newmont Mining, Kinross Gold and Goldcorp were also down. Gold ETF’s such as SPDR Gold Shares were also lower. To read the article in its entirety go here.
Thursday, January 21, 2010
Jan. 21, 2010: Gold Price Falls as Dollar Rises
Article from TheStreet.com
Gold price Falls as Dollar Rises
Alix Steel
01/21/10
NEW YORK (TheStreet) -- Gold prices fell toward $1,100 an ounce Thursday after President Obama vowed to shake up Wall Street with strict limits on bank's trading activity. Also, the U.S. dollar hit a five-month high against the euro. The author attributes this to a rising U.S. dollar, making dollar-based commodities like gold more expensive to buy in other currencies, often creating the inverse correlation between prices and the dollar.
Steel also states that increased worries over Chinese credit tightening is contributing to gold's slide. China has already ordered its banks to curb lending, but these inflationary figures could put more pressure on the country to restrict lending. An end to free money from China, which has stimulated the global economy, will continue to curb investor interest in purchasing gold as an alternative asset.
Read This Article
Gold price Falls as Dollar Rises
Alix Steel
01/21/10
NEW YORK (TheStreet) -- Gold prices fell toward $1,100 an ounce Thursday after President Obama vowed to shake up Wall Street with strict limits on bank's trading activity. Also, the U.S. dollar hit a five-month high against the euro. The author attributes this to a rising U.S. dollar, making dollar-based commodities like gold more expensive to buy in other currencies, often creating the inverse correlation between prices and the dollar.
Steel also states that increased worries over Chinese credit tightening is contributing to gold's slide. China has already ordered its banks to curb lending, but these inflationary figures could put more pressure on the country to restrict lending. An end to free money from China, which has stimulated the global economy, will continue to curb investor interest in purchasing gold as an alternative asset.
Read This Article
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