Gold price steadies despite normally bearish factors

Gold has shown a steady performance despite a number of economic factors which would normally be seen as bearish for the metal price.

LONDON - 

Australian research organisation, Resource Capital Research introduces its latest report on gold with the following statement: "The key factor for gold in recent months is not that it has not appreciated significantly, but that it has essentially held its value in a period of a strong US dollar, decreasing inflationary expectations, collapsing oil and commodity prices and aggressive hedge fund selling."

While this may be a statement of the obvious, given that all the factors quoted are normally considered adverse for the gold price, the yellow metal's resilience in the face of so many negative pointers suggests a considerable degree of underlying strength.

RCR points out too that over the past three months gold only fell 3.8 percent - and this was before the latest mini surge in price - while for the Australian gold mining sector currency movements mean that the price had actually risen 32 percent in terms of the Australian dollar - a considerable boost to a mining sector where costs are primarily Aus dollar denominated.  This applies also, of course, to other gold producing countries where the strong US dollar has led to a significant rise in price in terms of local currencies

The organisation points also to a strong increase in investment demand for gold in terms of record quarterly movement of funds into gold ETFs and the well documented demand for coins and bars which has led to temporary shortages and delivery delays in many places.  Jewellery demand has also remained strong in India and China although it has been weaker in the West.

RCR reckons that the strong increase in demand has been sufficient to mop up the widespread disinvestment resulting from hedge fund selling, margin calls and unwinding of forward contracts and that shrinking cash and bond yields will support further investment in gold as both a safe haven and a store of value - perhaps marginally different expressions of the same factor!

Looking ahead RCR feels "The near term outlook for the gold price remains closely tied to investment demand from safe haven buying, which has underpinned the price in recent months and is looking increasingly strong. If gold disinvestment tails off there is potential for further price gains. There is additional upside for a major gold price breakout should the US dollar lose its current safe haven currency status, through a further decline in the US economic outlook relative to other world economies in 2009."

RCR expects gold to trade in the range of US$750/oz to US$850/oz in the next month or so, followed by a potential upturn to around US$900/oz in 1H09 assuming U.S. economic conditions deteriorate relative to other major economies and the US dollar weakens.

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responses to this article

GOLD PRICE THE PSYSICAL PRICE OF GOLD RELATIVE TO DOLLAR STRENGTH OF THE MARCH HIGH IS NEAR EVEN , IF WE HAVE THE SAME PSYSICAL DEMAND WE HAVE NOW WITH THE HUGE PAPER FUND DEMAND AND A DOLLAR INDEX AT 72 AGAIN WE COULD SEE 1200-1500 GOLD PEAK IN 2009. by BRYAN on November 28 2008, 05:34 Find this comment inappropriate? Report it

1H09 Brian, thanks and agree. Do you know what the date time correlation is for 1H09 noted in the last paragraph. I am unlearned! Tks by Hal on November 29 2008, 11:41 Find this comment inappropriate? Report it

1h09 first half of 2009 Hal. gold is about to launch mid dec when the short squeeze manifests itself. by david on November 29 2008, 12:35 Find this comment inappropriate? Report it

1H09 Dave thanks - the obvious. Apprecite the quick response! Am fully invested in gold and am anxiously patient! by Hal on November 29 2008, 14:14 Find this comment inappropriate? Report it

Gold Trade Range Month US$874 to US$726, Quaretly US$750 to US$590 I am not very much bullish on Gold, reason are simple becuase i have short position and i am very clear about the Fundamental as well as Technical............if i see bullishness i will take posiiton for only 15 dollars. because of Macro and Micro . .more Economy changes in not only in US btu also Eurozone and china too etcccc . .less by Rakesh Varasia on December 01 2008, 04:10 Find this comment inappropriate? Report it

COMEX Hi, I keep hearing that there is going to be a raid on COMEX from international players by demanding delivery this month. Have you heard anything along that line. I've been following the spot price of gold and silver with ExactPric . .more http://www.learcapital.com/exactprice today both actually fell from their highs of last week by quite a bit, which really surprised me. . .less by Hal on December 01 2008, 12:53 Find this comment inappropriate? Report it

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