GOLD PRICE RISK NEWS – The gold price is around $ 1,340 Wednesday after yesterday’s $ 32 for slides and climbing the weakened U.S. dollar sovereign debt in Europe disappeared. Investments linked to the price of gold been put under pressure as gold futures, gold exchange traded funds and gold mining stocks have all faced a deluge of selling pressure last week.
The rising dollar has put pressure not only the gold price, but also commodities and cyclical stocks. Yesterday, silver fell $ 0.64 to $ 25.45 per ounce, oil tumbled $ 2.44 to $ 82.42 a barrel, copper and finished with a decrease of $ 0.20 to $ 3.72 per pound. The Dow Jones Industrial Average (DJIA) finished Tuesday down 178.47 points at 11,023.50, its worst day since Aug. 11. Both the stock and commodity prices in addition to the gold price rebounded early Wednesday after the release of the Consumer Price Index data for October, which came in below consensus expectations.
With decrease in the last week, the gold price has now dropped $ 83.15, or 5.8% of the $ 1,424.50 all-time record high on November 9. In a discussion of the recent weakness in the price of gold, Jeffrey Nichols, a leading gold and precious metals economist for over 25 years, confirmed that he is just a correction and that “gold soaring price trend will soon be Resume. ”
Nichols, who serves as Senior Economic Advisor of Rosland Capital, and as managing director of American Precious Metals Advisors, cited a number of factors contributing to the recent slide in the gold price. First was the realization by investors that the World Bank president Robert Zoellick’s call last week for a monetary system in which gold is only a “limited … instead of peripheral ‘role proposed for gold rather than a return to the gold standard.
Second, Nichols pointed to the rally in the U.S. dollar as a proximate cause of the recent decline in gold prices. The long gold bull noted that “Although gold is the ultimate safe haven in times of financial risk, many institutional investors and speculators are still uncomfortable with gold, and rather bearing assets, even at low yields.” Nichols went on to say that the “flight of the euro to the U.S. dollar could weigh on the gold price just as long. If the sovereign spreads debt crisis across Europe, he argued that the investment demand for gold in the world substantially would increase, while “as euro reduction, we expect gold to benefit from a renewed decline of the U.S. dollar.”
The third catalyst for the decline in the price of gold was speculation that the central bank of China, the People’s Bank of China (PBOC), is planning to raise interest rates thus increasing the opportunity cost of holding the yellow metal . Nichols characterized the potential monetary policy move as “prudent” and emphasized that with respect to gold, it stands for “a gradual upward adjustment of interest rates and a continued gradual appreciation of the yuan, Chinese currency, and contribute to … a healthy, long-term economic growth … the best scenario for the further growth of gold jewelry and investment demand. ”
Despite this recent downturn, Nichols argued that the long-term fundamental background for the gold price remains very favorable as a result of ongoing devaluation of the currency, the decline of my offer, and the central bank buying, among other items. As a result, he predicted that the price of gold will move “the first $ 2,000 per ounce, then to $ 3,000, and probably even higher in the coming years.”
source:goldalert
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