Gold News

Gold Prices Near 0.8% Weekly Gain as Summer Ends, "Big Surge" Expected on Weak US Data

Gold Prices 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 during the third-quarter (ending 30 Sept.) in 18 of the last 31 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 metal [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."

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Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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