The Daily Nugget – gold prices down, gold prices up

The euro fell yesterday, bad news for the gold price apparently which has recently been positively correlated to the euro. Gold fell to a 1 and ½ week low, as the dollar rose to a 1 ½ week high as few investors buy gold (certainly in the eurozone) and opt for uncle Sam.

The euro’s fall was thanks to further bickering, speculation and uncertainty in the Eurozone. Rumours of fallout between France and Germany regarding the formation of a banking union as well as worry regarding Greece’s budget shortfall and Spain’s will they/won’t they bailout request caused concern over the strength of the Euro.

Gold prices down with euro, dollar up

Other than euro-rumours, poor European data kept the single currency low yesterday, as well as the FTSE which also dipped as a result. The dollar climbed on the back of some ‘unexpected’ data from Germany which showed the Ifo index of business sentiment fall for the fifth month in a row, to its lowest level since March 2010.

Elsewhere in the Eurozone Van Rompuy waded in and contributed nothing of any value insisting the EU’s economic programmes must continue ‘with renewed vigour’. I can almost hear the eurocrats screaming ‘THAT’S WHAT WE ARE TRYING TO DO!’ from my desk in London.

Meanwhile the Portuguese government took further steps to cause suffering as it threatened to raise income taxes in a bid to control the deficit.

Things were so bad in the Eurozone that the Chicago Fed’s Index which placed the US recovery even further in doubt yesterday, could do little to distract from the single currency union.

Analysts remain positive that central banks’ easing programmes will continue to be perceived positively by the markets. Whilst data this week may be seen by some as the need to take a reality check, beliefs that monetary easing will soon feed through will keep the markets buoyant – including the gold and silver price.

This morning both the gold price and silver price are holding steady thanks to central bank monetary easing measures supporting market sentiment to hold precious metals, this is expected to continue after Japan indicated yesterday that the BOJ may be sent for monetary stimulus, further to the 80 trillion yen announced last week.

Gold demand increased in India yesterday after the yellow metal fell to its lowest rupee price in a fortnight, the rupee rose to a four-month high yesterday prompting jewellers and investors to restock in preparation for the festival and wedding season.

Increased demand in both China and India is expected for the final quarter of the year as the world’s largest gold-consuming populaces prepare for festivals and weddings.

Next week will be interesting to watch as the world’s hungriest gold consumer – China closes for a week for a national holiday. Many are expecting the gold and silver trade to remain sluggish for the week.

In a survey cited by the German newspaper Frankfurter Allgemeine Zeitung, inflation was shown to be the concept which causes Germans the most cause for concern, out of a choice of serious illness, lower living standards in old age and terrorism. Inflation received 63% of the vote.

Bloomberg writes, ‘The ECB’s new building in Frankfurt is now under construction. The project’s cost has grown to about 1.2 billion euros ($1.6 billion) from the originally planned 850 million euros, mainly due to inflation. For an institution mandated to ensure price stability, the ECB is giving Germans good reason to lose sleep.’

Both gold and silver’s behaviour yesterday and this morning is something which we are likely to have to get used to over the coming months. Whilst central banks’ printing presses and wealth theft is now guaranteed to continue (there’s no way they fancy reversing down this muddy path) data releases and speeches are likely to cause some retracements and corrections in the near future.

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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