Gold Trading "Quiet" as Summer Ends

From Adrian Ash

BullionVault

“Big Surge” Expected on Poor US Data

THE PRICE OF GOLD held flat early in London today, heading into the long August Bank Holiday weekend some 0.8% higher from last Friday’s close against the Dollar, Euro and Sterling.

The Silver Price stood 5.7% up for the week, nearing its best weekly close since late-June.

A further rally in Asian stocks meantime failed to buoy European shares, while commodities and G7 government bonds were also unchanged.

Ahead of US Fed chairman Ben Bernanke speaking at the Jackson Hole central-banking symposium today, upwardly revised US growth data failed to move the major currency crosses, save for extending the Japanese Yen’s retreat from this week’s 15-year highs.

In wholesale Gold Trading, London “was rather quiet” on Thursday and overnight volumes in Asian trade were “almost non- existent” according to one dealer today.

“The northern summer months have been weak for gold in more years than not,” writes former mining exec’ and industry journalist Lawrence Williams at MineWeb.

“In fact this year has been a bit of an exception with prices holding up remarkably well.

“Some take this as a pointer to a big surge ahead after the US Labor Day holiday [on Mon 6 Sept.] once market activity returns to normal in mid-September. We will see.”

US investors saw the gold price slip 8.2% from June’s record high to the summer’s low of $1158 per ounce one month later.

Gold prices have risen between end-June and New Year’s Eve in 21 of the last 30 years.
By the start of New York dealing on Friday, the metal was $4 below the second-quarter’s finish of $1244 an ounce.

“Precious metals [have seen] high volatility in thin trading,” says German refiner Heraeus’s head of sales Wolfgang Wrzesniok-Rossbach.

In the retail gold investment space, “German demand for precious metals bars in the past two weeks, despite negative reports on economic developments in other nations…and with their own economy doing well…did not get rekindled.

“Additionally, there has been an increase in critique on gold in the press, especially the rather negative [Euro gold] chart-picture.”

Heraeus’ team, however, are not as “skeptical” of the short-term gold price “as some of the technically-oriented analysts,” Wrzesniok-Rossbach says, citing instead the worsening economic and financial situation in the US and some Eurozone states.

“With low interest rates foreseeable for an extended period of time, this speaks positively for gold. In any case the downward risk appears to be much lower for gold than for the [industry-reliant] platinum-metals.”

Also noting the diverging path of much US and German data, “The Fed has an employment issue, and [the European Central Bank’s] Trichet does not,” says Diane Swonk, chief economist at Mesirow Financial in Chicago – and an attendee of this weekend’s Jackson Hole conference in Wyoming – speaking to Bloomberg.

“The ECB seems to be viewing the world more optimistically and the Fed more pessimistically,” says former Bank of England policy-maker Julian Callow, now chief economist at Barclays Capital.

Next Friday will bring US employment data for August, and “on further deterioration and another round of significant stimulus, inflation will sneak closer to the front of investors’ minds,” reckons analyst Daniel Major at RBS in London.

“That would be positive for the gold story.

“Should we see a meltdown in economic data, stimulating significant safe-haven inflows…we could see significant further gains.”

Adrian Ash

BullionVault

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Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

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