Tag Archives: gold-dollar relationship

Jan 04

Price of Gold Weekly Recap – December 31, 2012-January 4, 2013

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Monday Open: $1,675.20
Weekly High: $1,689.50
Weekly Low: $1,628.00
Friday Close: $1,651.70

Gold ended 2012 with a 12 year hot streak. The past decade has treated gold very well, and this yellow metal has been the talk of the town amid a global recession. Seen by investors as a safe haven, gobbled up by governments as alternative currency and watched by many as an indicator of economic turmoil, gold has had a large role in global finances in the past ten years. Although gold closed this year nearly $300 below the all-time high of $1,900 from 2011, the price of gold is still at a remarkable high, and boasts a 6% increase from the price at the end of 2011.

The markets were silent Monday and Tuesday for the New Year holiday, but reopened with a bang on Wednesday. Starting the year off right, gold responded well to the announcement on Monday that U.S. policymakers had reached an agreement regarding the fiscal cliff. Wednesday saw this week’s high of around $1,690. The fiscal cliff agreement, which had worried investors and citizens alike, rallied a global spike in trading around the globe.

Thursday, however, gold started to dip after better-than-expected unemployment data for the U.S. was released. A firmer dollar also slipped gold down a little, as these factors lessen the strength of gold as a safe haven investment.

Friday also saw losses in the gold market as investors worriedly responded to the previous day’s Federal Reserve meeting, in which members expressed mixed ideas about keeping the loose monetary policy that had been in place all of 2012. After the prolonged fiscal cliff agreement (a decision wasn’t reached until after December 31st, the cutoff date) Federal Reserve members discussed shortening the length of time for the previously decided mortgage-backed securities and long-term Treasury bonds. Some believe the policies should last until the end of 2013, some think they should end before the year, and some think there even needs to be further measures implemented.

These loose monetary agreements keep interest rates low, which at once help the economy bolster back but also create conditions rife for inflation, a positive sign for the hedge fund gold. With stricter Fed policies, gold may not be seen as such a secure hedge fund. Friday saw prices drop to the lowest since August. Gold investors will be keeping a very close eye on the Fed’s moves.

Nov 23

Price of Gold Weekly Recap – November 19-23, 2012

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Monday Open: $1,729.90
Weekly High: $,1751.90
Weekly Low: $1,722.20
Friday Close: $1,751.90

It was a fairly quiet week for gold, with a few economic indications in the U.S. and Europe not doing much to fluctuate the price, though the yellow metal had a lift at the end of the week.

Monday’s trading started out bullish on a weak dollar and higher crude oil prices, combined with positive economic news in European and Asian markets. Also, President Obama gave indications that the fiscal cliff crisis is likely to be solved before the end of year.

In the Middle East, tensions were high between Israel, Egypt and Iran, but this didn’t downgrade the metal in any significant way. Geopoliticizing tensions tend to promote first a sluggishness in gold trading at first, but if they escalate, consequently they promote a rush toward gold as a stabilizing investment.

Tuesday saw pretty much all of Monday’s gains pull back, as the Middle East experienced further rifts. Ben Bernake, Chairman of the Federal Reserve, made an announcement that the fiscal cliff crisis still looms ahead unresolved, but gold only lowered slightly. Even if the fiscal cliff does pass without action, gold may be positively affected as a safe haven in an unstable economy.

Euro zone officials held a meeting on Tuesday to discuss Greece’s debt bailout, but reached no agreement, which did little to affect the price of gold except lower it slightly on continued feelings of uncertainty. Wednesday was a slow trading day ahead of the U.S. holiday weekend. In Middle Eastern news, Israel and Hamas reached a cease-fire agreement, which also affected gold little.

U.S. markets were closed Thursday for Thanksgiving and early Friday morning, so only a hush was heard on the gold front. Friday saw a fairly significant jump up about $20 from a weaker dollar, and, presumably, anticipation of Black Friday sales data.

Next week, the Israel-Hamas conflict, the Greek bailout and the Federal Reserve’s actions concerning the fiscal cliff will all be factors to monitor.

Nov 02

Price of Gold Weekly Recap – October 29-November 2, 2012

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Monday Open: $1,710.50
Weekly High: $1,726.50
Weekly Low: $1,686.20
Friday Close: $1,686.20

Gold traded very lightly this week, mostly due to the closure of the New York Stock Exchange on Monday and Tuesday in light of Superstorm Sandy. Some U.S. economic reports released later in the week accounted for the sustained dip below $1,700 that closed the market on Friday.

Hurricane Sandy ravaged the East Coast, causing the first shutdown of U.S. stock markets due to weather in 27 years. No trading occurred Monday and Tuesday as energies were focused on mitigating the effects of the storm, but the Exchange opened smoothly again on Wednesday morning.

This week, economic reports from the U.S. on Friday and from China on Thursday were the causes of anticipation amongst gold stock traders. Wednesday was mostly a bargain hunting day as some joined the market after the dip, but it was still quiet after the recovery of the storm. Positive talks of Greece emerging from the eurozone also caused slight upward movement.

Other national banks have indicated economic stimulus this week, including the Bank of Japan, which continued its asset-buying trend and increased their stores by the equivalent of $137 billion. China’s economic data released on Thursday revealed better than expected growth in manufacturing, which translates into positive news for the precious metals sector, causing slightly higher trading Thursday.

The dip in the week occurred on Friday. U.S. economic reports released on Friday morning revealed unsettling news for gold, causing a drop of $40, the largest loss in four months, to nosedive below $1,700. Payroll data showed numbers higher than expected for October, translating into less pressure on the Federal Reserve to continue easing monetary policy. In October, employers in America added 171,000 jobs and factories expanded by 4.8%, both higher than forecasts predicted. The dollar also rose the most since July 20th, creating less incentive for investment in the safe haven of gold.

Also on the horizon is the U.S. presidential election on November 6th, which could change the course of gold depending on the elected President’s policies. Based on a survey by Bloomberg, gold is still bullish. 18 of 27 analysts expect to see gold rise next week, four were neutral and five were bearish.

Oct 26

Price of Gold Weekly Recap – October 22-26, 2012

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Monday Open: $1,729.50
Weekly High: $1,729.50
Weekly Low: $1,699.50
Friday Close: $1,1712.00

The gold market was pretty quiet this week, taking a few ups and downs based on market pressure, a Federal Reserve meeting and continued expectations about global stimulus measures. No major price shifts occurred; instead, gold operated within a pretty stable trading range, only dipping slightly below $1,700 midweek on Fed fears, but quickly regaining to the above $1,700 range. The major news this week was a statement released by the Federal Reserve that confirmed stimulus measures but did not announce any new policies.

Monday and Tuesday’s trading were basically fear-based sell-offs anticipating the Fed’s statement, compounded by a stronger dollar and outside markets. There was not great anticipation for the Fed’s meeting minutes, and economists generally didn’t expect any fresh stimulus measures, but there was a slight fear that since the dollar has been performing well lately, the Fed could decide to pull back their monetary easing at any time.

The euro dropped Tuesday as Moody’s downgraded Spain’s credit rating once again and reports said Spain’s economy contracted .4% more than last quarter. The dollar was also trading higher on Tuesday as gold hit a new 6-week low.

Once the Fed statement was released on Wednesday, gold jumped about $7 on the news that the Fed will be continuing its economic stimulus measures. However, it dropped all the way below $1,700 a few minutes later, after people had time to read through the FOMC minutes. The Fed reiterated its plan to stick with zero percent interest rates until 2015, despite gains already perceived in the housing sector.

Thursday saw gold rise on expectations that the bank of Japan may be considering stimulus measures, a rising euro and anticipation of the wedding season in India, which begins mid-November.

Friday was a slow day in the market, characterized by risk-off trading before the weekend. France got their credit score downgraded and Greece faced fresh economic woes; the gold season has started in India; and the U.S. reported slight gains in economic growth, strengthening the dollar.

Significantly, news has been traveling that Ben Bernake would probably not be running for office as Federal Reserve chairman for another term even if President Obama is reelected. This causes some concern for gold bugs, as Bernake is central to keeping interest rates low, an asset for gold.

“Without Bernanke, monetary stimulus from the Federal Reserve could be greatly reduced, and that will weigh on the price of gold,” said Jeffrey Sica of billion-dollar investment agency SICA Wealth.

The U.S. presidential election weighs in on many traders’ buying patterns, along with the anticipation of a “fiscal cliff” as it is being called: if Congress doesn’t solidify a debt reduction plan by the end of the year, a series of automatic spending freezes and tax increases will be enacted.

Oct 19

Price of Gold Weekly Recap – October 15-19, 2012

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Monday Open: $1,737.30
Weekly High: $1,752.20
Weekly Low: $1,718.00
Friday Close: $1,720.80

Gold opened on a one-month low this week, rallied upwards, then shot back down to close bearishly on a newer one-month low due to global economic pressures. There are a few global factors that contributed to the spikes this week, but as a whole gold is still operating at roughly $200 higher than the $1,500-$1,550 range that dominated most of the first half of 2012.

In a weak global economy, gold acts as a hedge fund and has been on the upswing for the past four years, largely due to economic restructuring of major economic states, not least of which has been the U.S. Federal Reserve’s easy monetary policies. Monday, however, China was on the forefront of traders’ minds, and gold dipped down from the weekend because data revealed that China, whose growth has been slow over the year, though still significantly ahead of the U.S., might not be considering economic restructuring if they can help it. Gold has risen in the past few months in large part due to America and Europe’s monetary loosening, and the same has been expected for China, but September data showed that China’s inflation rate dropped from 2% to 1.9% and their imports grew by 2.4%. This means uncertain trading for gold.

“The bottom line is China’s in this kind of gray area where…things aren’t as good as people want them to be but they’re not bad enough to continue to just throw money at the market,” Matt Zeman of Kingsview Financial said.

Tuesday, gold responded well after the U.S. released positive news on consumer price data, confirming that there is no current threat of significant inflation. If inflation were to appear on the horizon, the Federal Reserve may change their policies to curb price hikes, which would negatively affect gold. Without immediate fear of inflation, the Fed can continue its trend of monetary easing. The dollar also slipped a little compared to other currencies.

However, Wednesday reports on U.S. housing data served to balance out any permanent feeling of comfort regarding the dollar. Housing data was positive, implying that if that trend continues, the Fed may start to slow down their stimulus plans. Spain also received some important news; the struggling country’s credit rating was left unchanged rather than downgraded, and there is still talk of Spain requesting a bailout. Germany also joined the conversation by announcing a lower economic growth rate for 2013 than previously anticipated.

Gold traders anticipated Thursday as results from China’s third-quarter gross domestic product would be released and the European summit would begin. Data from China on Thursday confirmed the foreshadowing from Monday that China may not be as strongly considering economic boosting, since the outlook is good for economic growth.

Friday dropped gold back down below the initial trading point on Monday to a fresh one-month low. The dollar was trading higher on Friday, and the European summit meeting ended, revealing no news from Spain that the country would be asking for a bailout now. Economic uncertainties in all parts of the world contributed to an overall precarious feeling for unconvinced gold traders, causing many to flee the market by the end of the week.

Frank McGhee, precious metals trader of Integrated Brokerage Services LLC, put it this way: “People who rushed in for QE expecting to get a significant lift are getting out of the market.  The longer we don’t make a new high, the more people start getting nervous about where gold is trading.”

This week experienced a 2% drop in gold, the largest weekly decline in four months.

With noncommittal leaders in Spain, a U.S. election on the horizon, a stronger Chinese economy and the season for gold buying in India approaching, yet with a weak rupee, gold seems to be caught once again in a trading limbo. However, once the price of gold breaks $1,800, interest in this precious metal will surely return, as many investors see the yellow metal continuing to perform well in the long-term.

Sep 14

Price of Gold Weekly Recap – September 10-14, 2012

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Monday Open: $1,725.80
Weekly High: $1,777.10
Weekly Low: $1,724.80
Friday Close: $1,770.50

This week followed a bullish trend for gold since about a month ago when Federal Reserve Chairman Ben Bernanke gave solid indication he would instate quantitative easing. Gold bugs have been waiting for further news on monetary policy, and this week revealed the Fed’s plan to the delight of gold investors. After the doldrums of summer, during which gold started to dip below its previous holdings, gold is finally seeing a tremendous upsurge.

Last week gold hit a six month high, and this week saw gold shoot up another $30 to close just a third of the way below the $1,800 mark, a long way from when gold was hovering around $1,550 in the earlier summer months. Many believe $1,800 is just around the corner, and that 2012 could set the next record for gold’s highest price by catapulting it above $2,000.

Monday opened a bit softly after Friday’s reports of unemployment data and Fed expectations, but hit a solid stride mid-week and jumped drastically on Thursday after Bernanke finally revealed the Fed’s newest financial policies. The entire week, and month in fact, had been building up to Bernanke’s Thursday afternoon address at the third quarter FOMC meeting.

On Thursday, the Fed revealed its plan to spend $40 million buying mortgage-backed dept until employment improved and inflation remained contained. After months of uncertainty, the Fed has shifted focus from price stability of the dollar to boosting employment statistics. Also, the Fed stated it would probably not raise interest rates (which are at historical lows) until 2015, and Operation Twist is a key part of the policy, which retains that the Fed will buy longer-term securities as shorter-term ones mature.

To sum up, this means that inflation could be on the near horizon, and even the possibility of a weaker dollar encourages people to flee to the safety net of gold. After Thursday’s news, the price of gold rose 2%. This is the third round of quantitative easing enacted by the Fed since the recession began in 2008.

“The Fed’s inflationary behavior should be bearish for the dollar in the long run and drive investors to seek protection via the gold market,” Jeffrey Sherman said, who is the commodities portfolio manager of DoubleLine Capital, a company with more than $40 billion in assets.

Historical trends and the time of the season make it very possible that gold could rise to even higher, unprecedented heights. Chief Executive of Newmont Mining Corp., the world’s second largest gold producer, Richard O’Brien told participants at the Denver Gold Forum that $2,000 was just around the corner.

In related news, the Republican party has been calling attention to the possibility of returning the U.S. to a gold standard in recent weeks.

Aug 03

Price of Gold Weekly Recap – July 30-August 3

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Monday Open: $1,621.00
Weekly High: $1,625.40
Weekly Low: $1,586.30
Friday Close: $1,603.60

This week gold opened at a 6-week high, trailing off gains from last week’s European refinancing, and though the price of gold dipped lower as the week progressed, it still managed to close above the $1,600 mark. After last week’s 2.5% price jump due to news that the European Central Bank is prepared to give the economy a boost by printing more money (which will devalue the euro and send people to a safe haven in gold), Monday opened high but sank on Tuesday as many investors decided to opt out of gold and leave the market with the gains just made.

U.S. unemployment and job loss data was bleak early in the week, buffering gold losses, and the Fed gave an uneventful public address on Wednesday, which again confirmed no economic easing, though it did acknowledge economic sluggishness. Still, gold bulls are hopeful that the coming weeks will finally show some economic easing from the Federal Reserve.

By Thursday, gold had been on a 4-day downturn as both the U.S. and the Eurozone disappointed with a lack of concrete economic policy. Contrary to expectations, European Central Bank president Mario Draghi did not announce any monetary policy or interest rate changes. He addressed the public to say that any government bond buying wouldn’t occur until September, and only on certain conditions. Thursday dropped down to around $1,585 — $30 down from Monday.

“It appears that central banks now need more economic data for them to come out with more aggressive actions, and that’s disappointing for gold investors,” Phillip Streible said on the matter. He is the senior commodities broker at R.J. O’Brien, a futures brokerage.

Yet, gold rose a percentage point on Friday as the dollar buckled, more negative unemployment data rolled in, and investors once again began betting on Fed easing. This kept the yellow metal afloat above the $1,600 mark; although, the beginning of the week marked a 6-week high, the end of the week marked the biggest weekly drop in prices in the same time frame. Gold is still trapped in the $1,525 to $1,675 trading range, a long way from the year’s high of $1,781 in March, held captive mainly by the ambiguous remarks made on economic policy by Fed and ECB chairmen.

Jul 27

Price of Gold Weekly Recap – July 23-27

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Monday Open: $1,578.90
Weekly High: $1,626.70
Weekly Low: $,1569.10
Friday Close: $1,624.20

After weeks of a hesitant gold market driven by uncertainties surrounding the European debt crisis and continued lack of U.S. monetary easing, gold finally broke confidently above the $1,600 barrier this week when a series of reports started signaling a weaker euro ahead. Gold gained around $60 from the slow beginning of the week to a somewhat anticipatory closing, moving from the greatest inverse correlation to the dollar since January to the highest price of gold in more than a month.

Gold investors started out the week skeptical as the dollar reached a two-year high and gold stood at a -0.718 correlation with the paper currency, the strongest since the beginning of the year. Since gold trades inversely to the dollar, the yellow metal weakened as the greenback gained strength.

Worries over the Eurozone debt crisis continued to plague gold at the beginning of the week, but took a few surprising turns as the days rolled on. Tuesday started a very slight uptrend when Greece announced the country probably would not be able to pay its debts, indicating to investors there could be room for economic restructuring.

Then, Spain and France announced on Wednesday that the Eurozone would be adopting a common strategy to stabilize the euro, including enacting a supervisory mechanism on all euro area banks. This could mean that the European Central Bank could get significant and cheap funding, which could subsequently devalue the euro, thus elevating gold in a similar inverse fashion as the gold-dollar relationship. Sure enough, Wednesday saw gold reaching a two and a half week high after this news broke.

But it doesn’t end there.

Thursday continued the path of European restructuring and gold was bumped even higher after ECB president Mario Draghi proclaimed that he was ready and willing to take any steps necessary to float the euro. Specifically, “The ECB is ready to do whatever it takes to preserve the euro,” he said. Speculators can decode that as meaning that the bank will be inclined to print more paper money, which would inevitably reduce the strength of the currency and encourage investors to flock back to gold as an established safe haven.

Peter Schiff of EuroPacific Capital is one industry spokesperson who sees this as a major breakthrough for gold. The metal has been stuck in a limbo for a while, and Asian and Indian investors are still generally sitting on the sidelines as their economies stumble through some bumps this year. But while investors have been waiting anxiously for a signal from Federal Reserve chairman Ben Bernake that the U.S. would start printing more money, instead they got that confirmation from the European Central Bank regarding the euro, and it’s no small potatoes.

Schiff said on Thursday, “I’m surprised that gold is not rallying even more considering what’s happening.  Gold has now broken out of a channel.  There was a very nice trendline and we just broke out of that today.  Now that we have broken out of that channel, there is a lot of room to the upside.”

It should be an interesting time ahead for gold.