The Daily Nugget – on shaky ground

The gold price finally slipped overnight as investors booked profits from the recent rally in commodities seen in recent weeks after various central bank announcements. The queue to buy gold bullion eased as investors stood back for a moment.

This was of course expected, as we have said previously, at the time of writing gold prices sit around the $1,758 mark, however we suspect support will be found during the week at $1,730.

Gold prices ease, silver and platinum prices drop

Both silver and platinum saw bigger falls than gold during the day. Silver’s price fall was expected thanks to its shadowing of the gold price, whilst platinum fell most likely thanks to the Japanese factory closures in China.

Despite gold, and other commodities, falling slightly, the fundamentals for gold investment remain stronger than ever. Whilst many in gold and silver investment have known for some time that the economic situation, across the world, is unstable; it feels that for the first time this week that the rest of the world has woken up and has realised that no matter where you turn there are both geopolitical and economic issues.

Tensions continued to bubble up yesterday as US embassies across the Middle East remained under attack or siege. Whilst the Iran/Israel situation seems both sides are gunning for a fight. Both pose huge geopolitical risk, which in turn will impact us all.

Markets are also nervous in light of rising tensions between Japan and China, which shares a trading relationship worth $345bn last year. Analysts appear concerned that threats from Japan may delay business investment into China for the medium to long-term.

Economies are looking no better.

Yesterday the Empire State manufacturing index fell to -10.45 in September, down from -5.85 in August. This promptly saw the dollar fall further, particularly as analysts had expected to see an improvement in the data. Jobs, new order and prices have all suffered according to the index.

The Greeks must be feeling better understood this morning after both Merkel and the IMF said they felt sympathy for the Greek population, with Merkel stating her ‘heart bleeds’ for them. But, she urged, they must stick with the reforms and not delay them, so as to not prolong the pain. Whilst we would not say that Greece’s approach to the crisis has been the correct one, it’s not as though Germany and the ECB also have it sorted. We suspect that the pain will be prolonged no matter which of the options they may take.

Speaking of which the Eurozone’s annual trade surplus widened to €15.6bn in July, as unadjusted exports grew five-times faster than imports. This is mainly thanks to Germany which is the single currency’s biggest exporting country, followed by the Netherlands. The large gap between imports and exports signals the weakening domestic demand in the Eurozone.

Despite the Euro’s gains on the dollar in recent weeks following Draghi’s speech, optimism has begun to wain as Spanish yields began to rise again yesterday. This is likely thanks to market speculation that Prime Minister Mariano Rajoy would request aid; however, how this will work is unclear given the fact he is reluctant to impose further cuts on the Spanish public whilst the German government insists on strict austerity commitments from those who receive aid.

Today in the Eurozone, as well as the Spanish bond auction, the German and EU ZEW Economic Sentiment indicators will be released. Both are expected to show a slightly better pessimistic feeling than previously.

At present it seems we are playing human batlleships, one silly move and the game is lost. One strategic move and the game can be dragged on for longer. The devil lies in the detail; the Eurozone crisis, the Middle East, China and Japan and others, are keeping us on tenterhooks – no one knows which piece to play. However, rising tensions and uncertainty help us reflect why gold bullion investment  is a safe haven.

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Please Note: Information published here is provided to aid your thinking and investment decisions, not lead them. You should independently decide the best place for your money, and any investment decision you make is done so at your own risk. Data included here within may already be out of date.

About the Author

Jan SkoylesJan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment. Jan first became interested in precious metals and sound money when she met Ned Naylor-Leyland whilst working alongside him in the summer of 2010. Jan then went on to write her undergraduate dissertation on the use of precious metals in the monetary system. After graduating from Aston University in 2011 Jan joined The Real Asset Co research desk. Her work and views are now featured on a range of media including BBC, Reuters, Wall Street Journal, Mail on Sunday, Forbes and The Telegraph. She has appeared on news channels including Russia Today to discuss the gold price and gold investing. You can keep up with Jan's commentary by subscribing to our RSS feed Gold Investment News.View all posts by Jan Skoyles