Gold's Summer Sale: Last Days!
Gold and silver are nearing the end of this summer's savage correction...
WE'RE COMING to the close of the summer sale season for Gold and, following this summer's sharp correction, entering the main annual gold season in the final quarter of the year, believes Julian Phillips, the GoldForecaster.com.
Many US players will soon wind up their summer holidays and return to the Gold Market. Indian physical buying has re-entered the market as a real force, taking up bargain-sale prices as an early entry to their traditional gold-buying season.
The main driver of Gold of late had been US selling – primarily from the speculative and leveraged futures market of Comex contracts, rather than of physical bullion itself. Investment demand showed uncertainty at first, and as net sellers of small amounts, this left private investors at the mercy of short-term traders. They pressed the metal down until this vigorous support was shown.
Below $800 an ounce, this support has been visibly resistant to these pressures however. You can see that in the bounce we're now witnessing.
Separately, the US Dollar is now struggling to hold its ground at $1.46 against the Euro. The malaise of the US economy is by no means over, as the former chief economist of the International Monetary Fund (IMF) now warns of a really big bank going bust before long.
Fannie Mae and Freddie Mac are still ringing alarm bells for anyone who cares to listen, as the cost of financing their bonds is rising, again threatening a failure of equity support and a likely bail-out from the Fed. That would only emphasize that the broader credit crunch is worsening.
The US consumer is not yet in a position to add to the inflation seen in this week's wholesale price data – now running at a 27-year record. So we would expect the Fed to allow inflation to go untended, relying on deflation in other quarters besides consumer prices to dampen it.
Expect the Fed to try and nurse already fragile growth instead. This translates into slower capital investment into the United States from Asia and the Middle East, plus a continuation of the trade deficit at unacceptable levels, leaving the Dollar to turn down again shortly – and sharply.
Gold and silver are nearing the end of the savage correction they have endured this summer.