Gold Futures rose to trade near a one-week high as investors boosted holdings in exchange-traded products to a record for a third day. Gold and Silver Prices rose yesterday alongside other commodities including Crude Oil and Copper as optimism for a US Budget deal and unrest in the Middle East spurred Gold Demand as an alternative investment. Comex Gold Prices for Dec contracts shot up to $1735.5 & Comex Silver Prices traded up to $33.22 before closing at $1734.4 & $33.19 respectively. Gold Prices for Dec contracts reached the 100-day average of $1,734 from a dip early November to the 200-day average of $1,670.20. However, the contract yet remains below the 50-day average of 1,743.60. Economic highlights today include Housing Starts and Building Permits and on Wednesday Initial Jobless Claims, Michigan Sentiment, and Leading Economic Indicators. US CFTC said that speculators increased long bets in US Gold Bullion ending the week of November 13th. Silver contracts also rose from the prior week. US
US Optimism Driving Gold Prices as Risk is back on:
European, Asian and US stock markets were higher Monday on notions the Obama administration and the U.S. congress are moving closer to a deal to avoid the Fiscal Cliff implementation of tax increases and spending cuts that would be implemented in January if no agreement is reached. There is a feeling they will do everything they can to avoid not reaching an agreement. Gold Market investors added Gold Bullion to hedge against financial market turmoil, depreciating currencies and the threat of inflation. Holdings in Gold backed ETPs rose to 2,604.207 metric tons yesterday, data compiled by Bloomberg show. Gold ETF funds climbed to a record high of 75.421 million ounces on November 16th showing how institutional demand for the ETF remains robust as ever. Gold ETF Holdings rose 99,000 ounces Friday following 136,000 on Thursday. So far this month, ETFs have grown by just 491,000 ounces. Gold Bullion traded in US Dollar is heading for a 12th consecutive annual gain as central banks from the US, Europe and Asia utilized quantitative easing to protect fragile financial and economic systems. Gold reached new records in Swiss Francs, Indian Rupee and Rand since September, a year after setting a high in dollars. US Dollar strengthened 0.2% against the Euro after Moody’s Investors Service lowered France’s government bond rating, renewing concern the region’s debt crisis is deepening. France lost its top credit rating at Moody’s Investors Service, which also maintained a negative outlook for Europe’s second-largest economy, citing what it called a worsening growth outlook. France was cut to Aa1 from Aaa, the rating company said yesterday. The Moody’s downgrade follows one by Standard & Poor’s in January and increases pressure on President Francois Hollande to find ways to bolster growth. This downgrade comes a few days after announcements of structural reforms that are probably the strongest for a long time in France but it also signals that while they are ambitious the recent announcement of reforms is not enough to reassure investors that France is on the right track. Manufacturers have announced thousands of job cuts in recent months, driving up unemployment to its highest since 1999.
Other Influencing Factors for Gold Movements:
European Union sovereign debt crisis remains a major uncertainty and major worry in the market place. If EU officials give a haircut or write off Greek debt, then other financially troubled EU countries would likely want the same. German officials reiterated opposition to any Greek debt write-down. With a haircut on official loans strongly opposed by Germany, there is speculation that Greece may buy back debt using privatization assets as collateral or a loan from the ESM – European Stability Mechanism. Disagreement between the EU – European Union and the IMF – International Monetary Fund on how to put Greece on a sustainable path, is holding back the release of the 31.5 billion Euros tranche to Greece. In addition, a number of European parliaments need to agree to the payment before it can be dispersed. The continued uncertainty will likely keep markets on edge a while longer. Official data last week confirmed that the Eurozone is back in recession for the first time in three years. Concerns the US may not be able to avoid going off the Fiscal Cliff at the end of the year and Greece may have trouble having its next bailout disbursement approved, caused investors to continue to build their Gold ETP holdings as a hedge against worst-case scenarios. Crude Oil prices were sharply higher yesterday on the high Middle East tensions and on some short covering.Israelis taking a very hard line against Hamas, including heavy air strikes in the Gaza Strip over the weekend and the possibility of moving ground troops into Gaza. Such could agitate Egypt and further inflame Iran. The situation could escalate quickly, which would in turn likely produce significant safe-haven demand for Gold. Any escalation of potentially destabilizing geopolitical events, have always proven to be extremely positive for Gold Prices as demand for Gold as a safe haven asset drives into high gear.
The Gold Bull Run:
Gold rallied 70% as the Fed bought $2.3 trillion of debt in two rounds of quantitative easing from December 2008 through June 2011. Investors buying bullion as a hedge against inflation and a weaker dollar generally earn returns only through price gains, increasing its allure as interest rates decline. It rose six-fold since the end of 2000, beating the 34% advance in the S&P 500, with dividends reinvested, and the 91% return on Treasuries. The Dollar Index fell 26%. Gold advanced 10% to $1,723.79 in London this year, headed for a 12th consecutive annual gain, the longest streak in data compiled by Bloomberg going back to 1920. Prices reached a record $1,921.15 in September 2011. Gold Bullion held through ETPs, the first of which listed in 2003, reached a record 2,603.7 tons on Nov. 16, valued at $144.3 billion. That exceeds the official reserves of every nation except the U.S. and Germany, World Gold Council data show. The SPDR Gold Trust alone holds 1,342.6 tons. Paulson & Co. has a $3.62 billion bet through the SPDR Gold Trust, the biggest gold-backed exchange- traded product, and Soros Fund Management LLC increased its holdings by 49 percent in the third quarter. Paulson, who became a billionaire in 2007 by wagering against the sub-prime mortgage market, owns 21.8 million shares in the SPDR Gold Trust, making him the biggest shareholder, a Nov. 15 SEC filing showed. His holding of about 66 tons exceeds the official reserves of nations from Brazil to Bulgaria to Bolivia. George Soros increased his investment in the trust to 1.32 million shares in the third quarter, the most since 2010, a Nov. 14 SEC filing showed. The stake, with each share representing about a 10th of an ounce, is valued at $219 million. Prices advanced 59% since January 2010, when Soros called Gold the “ultimate asset bubble.
UAE Gold Demand plunges 22%:
Gold sales in the UAE plummeted 22% to 8.7 tones in the third quarter of 2012 compared with the corresponding period of last year at 11.1 tones, latest data from World Gold Council shows. Jewelry demand in the UAE saw a decline of 20% in Q3 2012 over Q3 2011 while investment demand for gold coins and bars slumped 28% in the same period. In dollar terms, the demand destruction was an even steeper 24%, with gold sales in value terms plummeting to $462 million (Dh1.7 billion) compared with $607m (Dh2.23bn) in the year-earlier period.China also saw an 8% slump in Gold Demand over the same period. Quarter-on-quarter, however, global Gold Demand improved 10% due to relatively low prices. According to WGC, the reasons behind the rather dramatic drop in demand are the “extraordinary levels of demand witnessed during Q3 2011 when Gold Prices shot to highest levels till date” as well as the “subdued activity across the asset spectrum for much of the period (a combination of summer doldrums and a general sense of uncertainty among investors) and slowing inflation in a number of countries.” “The most significant contribution to the fall in Gold Demand came from the drop in bar and coin investment,” the WGC report states. “This was largely reflective of a lack of strong inflows in certain (notably Western) markets, rather than the emergence of any string profit-taking activity,” it highlighted.