Fear driving investors back to gold as it toys with $1,000 again
Returning doubts on the strength of the global economy are driving some big investors back into gold as an economic insurance policy and pushing it up to close to $1,000 again.
Author: Lawrence Williams
Posted: Friday , 04 Sep 2009
LONDON -
mineweb.com
Gold sentiment seems as if it may be changing again. The gold price has been rising quite sharply the past few days and at the time of writing was poised to test $1,000 again while the world's biggest gold ETF, with holdings of more than most central banks, has seen a very modest rise in its gold holdings. While a 0.14% increase in gold holdings at the SPDR Gold Trust may not seem like much, it does suggest that after an almost continuous 3-month decline in holdings as stock markets picked up, a return to the upward path may be beginning as investors become nervous about the continuing strength of the global economy.
It is obviously too early yet to say whether this represents the start of a trend or not. Gold has toyed with the $980 to $1,000 an ounce levels before already this year and last and has always come crashing back down as less solid gold investors deem it a good time to take profits - and it could well happen again. But one does get the impression that anti-dollar and pro-gold sentiment is beginning to come to the top, and safe haven demand is beginning to regain influence.
GATA, the Gold Anti Trust Association, has always been of the opinion, strongly expressed, that there is a major conspiracy among the financial powers-that-be to manipulate and restrain the gold price - in part to protect the U.S. dollar as a rising gold price is generally seen as an indication of a decline in value of the greenback. With the dollar being the world's reserve currency, it is not in most countries' interests to see its value decline - although to an extent it would have to be looked at as a decline against what? The U.S. economy is not the only one in difficulty and to an extent any dollar decline has been mitigated by currency weaknesses elsewhere. Even China has a vested interest for the time being at least to see dollar strength maintained given its trillions of dollars of holdings in its reserves, although it may be working to reduce its dollar dependence - see Chinese sovereign wealth fund dumping dollars for strategic investments like gold.
But what has been seen of late is increasing talk towards sidelining the dollar as a reserve currency in favour of currency baskets incorporating stronger currencies to mitigate risk - or even gold as part of a package - and it may well be that any ‘conspiracy' to hold down the gold price, if indeed there is one over and beyond Central Bank desires to maintain currency stability, is losing its attraction and gold may be allowed to float more freely (if indeed it is being held back in the first place!)
But perhaps more importantly in the context of immediate gold price strength more fears are beginning to take hold about the perceived lack of strength in the U.S. economy - and of some other economies too - and whether the recent stock market recoveries can be justified. This is seen as beginning to drive big investors back into gold as an economic insurance policy.
Recent economic data in the U.S. has been poorer than expected thus denting people's confidence in the strength of the recovery. This has coincided with a return to work for those bankers, fund managers and financiers in the northern hemisphere who may have been away on holiday and further bad economic data could easily be the trigger to drive gold through the $1,000 mark again. Whether this can be maintained for a longer period than it has managed before when it has toyed with this level remains to be seen. Meanwhile activity could still be a little muted this weekend with the U.S. Labor Day holiday upon us. |
