This week the Gold market experienced a monumental sell-off causing the Gold and to settle below the psychological $1100.00 level the first time since December 31, 2009. During the week we traded as high as $1141.00 and as low as $1081.90 settling at $1089.70 for the shortened trading week. The Gold market has been pressured from several Global concerns recently. (1) The Central Bank of China deciding to raise interest rates .50 basis points in attempt to set aside reserves and help to curb pending inflation. Since China is dedicated to building its Gold reserves from 1,200 tons to 10,000 tons over the next 10 years obviously they would prefer lower prices ...if indeed they are intending to purchase the remaining 200 metric tons of IMF Gold. As you may recall The Central Bank of India purchased 200 metric tons of IMF Gold two months ago...($1045.00)... (2) The Euro slipping to six month lows, pressured by concerns over Greece's swelling budget deficit. This has helped to strengthen the U.S Dollar versus the Euro. A stronger Dollar makes Gold less appealing as an alternative asset (3) President Obama's Administration proposal for stricter limits on financial risk-taking sent the Gold, Bank shares, and Wall Street on an avalanche sell-off. Despite all the negative news for the Gold market selling off over $50 for the week as a Gold bug I certainly realize it could have been much worse. The Rupee of India has fallen to its lowest in two weeks. A weaker Rupee makes the U.S Dollar quoted Gold expensive. This has caused the jewelers of India to buy less aggressively. However the demand for physical gold is always insatiable. The people of India have always understood the allure of Gold. It represents prosperity and a symbol of wealth that has always retained value. Unlike Commodity traders who buy and sell in hopes of a quick profit the the citizens of India are thought to own 12% of all Gold ever refined. Gold is the gift of choice during their many festivals and wedding seasons.
Silver has also taken a beating this week as Global concerns that affected the gold simultaneously affect the Silver. Just one short week ago it looked like Silver was prepared to make a run toward the $20.00 level instead the Silver settled at $16.92 for the week. With government budget deficits on the rise globally it would appear to me that investors would begin losing confidence in affected currencies and seek safer havens especially gold and Silver.
Mike Daly / Gold Specialist