So far this week we have witnessed another all-time high( August Globex) of $1254.50 on Tuesday( June 8th )and low of $1212.10 as the global economic and geo-political uncertainties continue to fuel the market volatility. There is certainly huge physical demand world-wide As savvy investors have lost confidence in the fiat currencies and have apparently chosen Gold as a “safer haven” investment. The incredible demand has been the key fundamental that has been driving and maintaining these record levels.
After recording record prices earlier this week the gold market struggled between the $1250.00- $1255.00 levels as technical selling and hints that some FOMC members would consider raising interest rates by the end of summer had “bulls” taking profits. Any time the words “higher rates” and ‘FOMC” are used in the same sentence it usually sends Gold south. Bernanke testified in front of the House Budget Committee on Wednesday and the following are some highlights from that committee testimony…
– “The Fed will take all necessary steps to aid in the economic recovery”
– “The tight credit is restraining commercial real estate”
– “Long run inflation expectations have been stable”
– “Inflationism is likely to remain subdued”
These comments may have been interpreted by investors as indication the Fed may be raising rates sooner than later. We still have 8 Million Americans unemployed and in my
opinion that should be priority one! The situation in the European Union continues to be brittle however, there appears to be more stability and less chaos coming out of the region. European Central Bank President Jean-Claude Trichet stated “Inflation pressures are contained over the medium term” and added “The ECB will do what is needed to maintain price stability” … This probably restored some investor confidence and halted some bullion buying…
China’s State Administration of Foreign Exchange (China’s Foreign Exchange Regulator)stated that the current” volatility in the Gold market was not suitable for asset allocation”…. This certainly was bearish for Gold considering China is the largest producer and number two consumer of Gold in the world… However, not too long ago China declared they would increase there Gold reserves by 10,000 Mt in the next decade…The regulators may not be willing to speculate in the Gold market but the Citizens of China have developed an insatiable appetite for owning Gold.
Jobless Claims dropped by 3,000 to 456,000…this was worse than anticipated as many economists predicted 450,000… Treasury Secretary Timothy Geithner told the Senate Finance Committee “The broad strength of U.S exports to China and the world is one
reason why we are seeing strong growth in manufacturing”….
Much of this news mentioned above has been “bearish” for Gold. But as I write August Gold has settled at $1222.20…. The resiliency has been phenomenal….The demand is there… Investors worldwide are watching the Geo-political tensions Between North Korea and South Korea, Israel and the Palestinians, As well as the border clashes on the Iraq/Iran border…. Warring environments are normally ‘ bullish” for Gold as investors
choose ” safer havens “especially in oil producing regions…
Mike Daly / Gold Specialist
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