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January 26, 2010 / Hal (GT)

Gold Pressured right now. But will it continue?


Right now looking at ExactPrice all the precious metals are coming under pressure. But there appears to be a battle between those forces. Gold got down to $1086 or there abouts this morning and has since regained lost ground and is sitting at $1096 as I type. Silver too has seen some selling off, it’s low of $16.42 and has recovered to $16.62.

In part I think it’s just the season. Of course some are pointing to other factors like the shorts that the big banks hold. Something Ed Steer has been pointing out.

Here’s a good article worth reading: How does the U.S. $ Really Affect the Gold Price?

We have to ask ourselves what prompts investors large and small to go out and buy gold for their portfolios. Are they moved by a single piece of news that is seen on television or one piece of U.S. economic news? No, the average gold investor has accumulated reasons over time, which convinces him that it is wise to hold gold. But the real truth is that the gold market is global and affected by a vast number of investors each with his own reasons for buying gold from Mongolia to Manhatten. And at this moment in time, it is the non-U.S. investor that is driving the gold price.

Another item that I think people should read and keep in the back of there minds is this:

How Long Before the Demand for Physical Gold Blows Through the Paper Supply?

Here’s an excerpt:

A massive disconnect is developing between the paper gold market (futures/OTC derivatives) and the physical gold market. There have been reports from London for several months now of delivery problems and tightness of supply in the physical market. Evidence of this is observed by the persisently high premiums which have been occurring throughout the various Asian markets (India, China, Viet Nam) for several months now. There also have been several accountings of delivery problems/delays in London and NY. Furthermore, the U.S. Mint suspended production of gold/silver eagles several times during 2009 because of a shortage of the gold/silver blanks used to mint the coins.

Just over the wires is that the President is planning on putting forth spending freezes to congress for the next three years. As much as I think that would be a good thing, I don’t realisticly see it happening. Also, the initial info I’ve seen is that it is for only 17% of the projects going on, while still a good thing, the way our government likes to spend money I imagine that the 17% of projects not getting more money will equate in the minds of the politicians as a go ahead to create new projects amounting to a 34% increase.

And if that doesn’t happen then at the next crisis the spending freeze will thaw and money will flow once again with the hope that the citizenry will have forgotten about the freeze. The point at which that will happen will likely be right after the elections. Yeah. That’s me being a cynic.

Well, I need to go. Right now Gold is attempting to continue the rally. The spot price is back is at $1099.10 an ounce. Track it for free with the widget ExactPrice.

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