Gold: Four Reasons to Expect September Gains 19 comments
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The gold market typically ends its summer doldrums with a sharp move higher as autumn draws in. Twenty of the last forty summers saw the price dip before rising sharply to end the year higher, above both January 1st and the spring peak.
Will the mode apply again in 2009? This summer sale knocked some 10% off the February and June peaks in Dollars. For Sterling investors, it offered the steepest discount to early-year peaks since 1992, as the Financial Times noted last month, quoting our research here at BullionVault. And now "Gold volatility is set to rise as we head into September," reckons Walter De Wet at Standard Bank, writing a note to clients Friday morning.
"The underlying price should move either up or down. We expect the move to be higher."
1. US stock-market volatility is typically highest from September to November, and is likely to spill over into other markets, including gold;
2. Jewelry demand in the fourth-quarter averages three times the third-quarter demand, a seasonal pattern that "should remain, irrespective of the actual level" and boost volatilty;
3. Standard Bank also expects the Euro to rise vs. a weakening US Dollar, reaching $1.50 by year-end. Gold priced in Dollars typically moves in the same direction as Eur/USD;
4. Finally, "The Gold Price at which the physical market is willing to buy has increased steadily over the past few months," providing not only good support but also reducing scrap-metal supply at higher levels.
Checking point one, volatility in US stocks retreated this August to a 13-month low. Point three saw the Euro touch a 3-week high of $1.4400 today, holding gold for Eurozone buyers below €663 an ounce – unchanged from the start of this summer, just like the Dollar price.
Re: points two and four, however, putting a floor under gold doesn't mean prices must rise. Speculative and investment trading remain the big drivers, just as they were in the late '70s run and this decade's bull market so far – and just as they weren't during the doldrums of mid-2009. The odds of a late-third quarter surge, in short, depend on what happens elsewhere – to stocks, credit, perhaps oil and no doubt the Dollar.
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This article has 19 comments:
On Aug 29 09:59 AM gooter wrote:
> Gold "typically" moves higher as autumn draws in? Really, 20 of the
> last 40? So, half the time it doesn't?
jejeje :)
"Gold is not about to appreciate drastically against anything with real intrinsic value. Of course just about anything could happen to its Dollar Price."
I prefer the second sentence. The FED is intentionally debasing US$ and, at the same time, doing it in an "orderly fashion" preventing a run on US$. How long will they be successful? I think "the stars" are not on their side with an equilibrium breaking down before the year-end.
On Aug 30 04:54 PM ManAboutDallas wrote:
> Japan just kicked over the first US$ applecart at their elections,
> yesterday. Goodbye, dollar; ah, we hardly knew ye.
On Aug 29 01:44 PM Dave Wrixon wrote:
> Gold is not about to appreciate drastically against anything with
> real intrinsic value. Of course just about anything could happen
> to its Dollar Price. Will that make you rich? Well only if you are
> an American investor with a very limited perspective.
On Aug 29 06:05 PM Paul H. M. wrote:
> Hey man, I'd rather hold dollars thank shitty U.K. Pounds.
On Aug 30 04:54 PM ManAboutDallas wrote:
> Japan just kicked over the first US$ applecart at their elections,
> yesterday. Goodbye, dollar; ah, we hardly knew ye.
Fed monetizing the debt - Check
Japan reducing dollar holdings - Check
China trading in USD for hard assets - Check
Russia trying to accept their own currency for oil - Check
How does anyone think this looks good for the dollar?
Well today (September 2, 2009 2:08PM EST) Gold Spot is - bid/ask 976.30 - 977.30 which means - well you can do the math. Yesterday it was around USD 950 oz. What I am reading from Adrian's article, is that this could go up or down depending on "hot money" and not the usual flux fundamentals due to India's buying season etc, the latter notably down over previous years. That "driver" from investments is a dynamic which portends high volatility. So watch your timing. All obvious I know.
I am long gold bullion so a day's ride up or down is of no real consequence except delaying a purchase of bullion until the smoke settles a bit.
""""The State-owned Assets Supervision and Administration Commission, the regulator and nominal shareholder for state-owned enterprises (SOEs), told six foreign banks that SOEs reserved the right to default on contracts, Caijing magazine quoted an unnamed industry source as saying in an article published on Saturday.
"The move is not meant to cover a comprehensive range of businesses and companies. It's mainly to deal with some problematic contracts that were signed before, especially those that might have insufficient information disclosure or two parties have disputes over certain details," a government official with knowledge of the issue said.
The official declined to be named due to the sensative nature of the issue. (Reporting by Eadie Chen and Chen Aizhu; Editing by Ken Wills""""""""""