The price of gold recovered overnight losses after the release of US Federal Reserve meeting notes in London trade Thursday morning, rising back to $1375 as major stock markets also rose with commodities.
Spot gold prices slipped back below $1470 per ounce Thursday morning in London, drifting as world stock markets failed to follow Wall Street higher, where equities yesterday hit new all-time highs. Silver held above $24.00 per ounce, just shy of last week’s finish, as commodities slipped overall.
Over the next few years the demand for platinum for use in jewellery, auto, and other industries, is expected to continue to rise. Meanwhile, thanks to political uncertainty, declining ore grades and escalating production costs, supplies continue to fall. This creates a potential opportunity for investors.
On Friday morning we warned investors that they “need to be prepared for one last washout in the gold market, during which the price falls by $100-$150, or perhaps even more”, and by mid-afternoon this move was underway. This article looks at what it was that moved the market and tries to determine the level at which gold will find support.
There exists today a vast disconnect between the performance of the stock market and what is taking place in the real economy. Over the past few months the Dow, S&P 500, and Russell 2000 stock indices have all climbed to new all-time highs. However, the jubilation in the stock market is at odds with the gloomy sentiment found in the real economy.
The key drivers behind China’s growth recovery are still largely intact. Infrastructure spending has accelerated strongly since late last year, the real estate recovery is becoming more entrenched, and the outlook for exporters is improving. In addition, recent policy tightening does not pose a major threat.
Most of the recent “currency war” talk refers to countries trying to lower the value of their currencies to gain a trade advantage and/or make their debts more manageable. But this war has another theater, where a weaker currency is not the main goal.
The over-capacity and over investment problem in China is concentrated in low-end manufacturing businesses and sectors that experienced a massive boom during the last decade. Conversely, public infrastructure is grossly inadequate to accommodate further urbanization.
Last week copper broke down out of a multi-month consolidation pattern providing an excellent potential short trade. However, the industrial metal’s bearish move may also signal a slowdown in the global economy.
After trading sideways for several sessions, gold bullion jumped above $1590 an ounce for the first time this month Tuesday morning in London, in what analysts called a “technical” move after gold broke through a key level following remarks from Bundesbank president Jens Weidmann.
For 11 years central banks around the world were net sellers of gold. However in 2009 they stopped selling their gold and became net buyers, and as today’s chart shows, central banks are continuing to accumulate gold in spite of the lower price.