Gold & Silver Digest: 8/6/13
The Gold & Silver Digest contains headlines of stories that members of this group deem relevant and/or interesting to precious metals enthusiasts.
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8/6/13 10:26 PM EST US close metals price quotes from Finviz
Gold fell to its lowest in nearly three weeks on Tuesday, losing 1.5 percent after encouraging U.S. economic data showing the trade gap narrowed and more indications the Federal Reserve could withdraw its monetary stimulus as early as next month.
Bullion's failure to hold above $1,300 an ounce earlier in the day triggered technical selling, traders said.
In part one of my series on gold, Was Gold In A Bubble, I discussed why I thought that the gold price had gotten ahead of itself, like any asset in a bull market, but was not in a bubble. I compared it with bubbles of years past and showed the distinction between gold’s price action and that of true bubbles. Today I will talk about what caused the unnaturally sudden, dramatic drop in the price of gold.
For one thing, there is India, the world’s biggest consumer of gold for jewelry, with an astonishing 25% share. (China bought more gold last year, but was not tops for jewelry use.) The current Indian government continues to try to improve its balance of trade by raising taxes on the metal and restricting gold imports in various ways.
Marcus Grubb, Managing Director of Investment, World Gold Council says rising demand from India and China will underpin a recovery in the price of gold.
Despite increased purchases of gold from both countries, they are expected to continue buying the yellow metal.
One of the biggest factors driving the bull market in gold over the past decade was consistent buying by central banks. After 21-straight years of selling, central banks in aggregate became net buyers for the first time in 2010. In 2012, they bought the most gold in 50 years.
Gold futures continued to fall in the early part of Wednesday’s Asian session, though only modestly as traders in the region digested some disappointing euro zone economic news that punished the yellow metal during Tuesday’s European and U.S. sessions.
On the Comex division of the New York Mercantile Exchange, gold futures for September delivery inched down 0.07% to USD1,281.60 per troy ounce in Asian trading Wednesday after falling 1.51% during Tuesday’s Asian session.
On the heels of continued volatility in global markets, the Godfather of newsletter writers, Richard Russell, warned that he has never seen anything like what we are currently witnessing in his 60 years of watching the markets. Russell also discussed what people should be doing with their money in key markets, including stocks and gold.
Richard Russell: “When things get this crazy, one has to go by the seat of one's pants. According to Gene Epstein in this week's Barron's, the US jobless rate is not 7.6%, it's actually 7.9%. Since the 2009 lows, the nation's Gross National Product has swelled by $1.3 trillion, but the stock market has gained $12 trillion in value.
The largest silver mining company in the world just came out with their first half financial results and the figures were dismal. Fresnillo’s first half profits declined a staggering 60% compared to the same period last year. However, at current metal prices the largest silver producer in the world could be experiencing losses the second half of the year.
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