Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
AI Tech Stocks Buy Ratings, Levels and Valuations - 14th Apr 21
Easy 10% to 15% Overclock for 5600x, 5900x, 5950x Using AMD Ryzen Master Precision Boost Overdrive - 14th Apr 21
The Current Cannabis Sector Rally Is Pointing To Another Breakout - 14th Apr 21
U.S. Dollar Junk Bond Market The Easiest Money in History - 14th Apr 21
The SPY Is Nearing Resistance @ $410… What Is Next? - 14th Apr 21
The Curious Stock Market Staircase Rally - 14th Apr 21
Stocks are Heating Up - 14th Apr 21
Two Methods in Calculating For R&D Tax Credits - 14th Apr 21
Stock Market Minor Correction Due - 13th Apr 21
How to Feed Budgies Cucumbers - Best Vegetables Feeding for the First Time, Parakeet Care UK - 13th Apr 21
Biggest Inflation Threat in 40 Years Looms over Markets - 13th Apr 21
How to Get Rich with the Pareto Distribution - Tesco Example - 13th Apr 21
Litecoin and Bitcoin-Which Is Better? - 13th Apr 21
The Major Advantages Of Getting Your PhD Online - 12th Apr 21
Covid-19 Pandemic Current State for UK, US, Europe, Brazil Vaccinations vs Lockdown's Third Wave - 12th Apr 21
Why These Stock Market Indicators Should Grab Your Full Attention - 12th Apr 21
Rising Debt Means a Weaker US Dollar - 12th Apr 21
Another Gold Stocks Upleg - 12th Apr 21
AMD The ZEN Tech Stock - 12th Apr 21
Overclockers UK Build Quality - Why Glue Fan to CPU Heat sink Instead of Using Supplied Clips? - 12th Apr 21 -
What are the Key Capabilities You Should Look for in Fleet Management Software? - 12th Apr 21
What Is Bitcoin Gold? - 12th Apr 21
UK Covd-19 FREE Lateral Flow Self Testing Kits How Use for the First Time at Home - 10th Apr 21
NVIDIA Stock ARMED and Dangeorus! - 10th Apr 21
The History of Bitcoin Hard Forks - 10th Apr 21
Gold Mining Stocks: A House Built on Shaky Ground - 9th Apr 21
Stock Market On the Verge of a Pullback - 9th Apr 21
What Is Bitcoin Unlimited? - 9th Apr 21
Most Money Managers Gamble With Your Money - 9th Apr 21
Top 5 Evolving Trends For Mobile Casinos - 9th Apr 21
Top 5 AI Tech Stocks Investing 2021 Analysis - 8th Apr 21
Dow Stock Market Trend Forecast 2021 - Crash or Continuing Bull Run? - 8th Apr 21
Don’t Be Fooled by the Stock Market Rally - 8th Apr 21
Gold and Latin: Twin Pillars of Western Rejuvenation - 8th Apr 21
Stronger US Dollar Reacts To Global Market Concerns – Which ETFs Will Benefit? Part II - 8th Apr 21
You're invited: Spot the Next BIG Move in Oil, Gas, Energy ETFs - 8th Apr 21
Ladies and Gentlemen, Mr US Dollar is Back - 8th Apr 21
Stock Market New S&P 500 Highs or Metals Rising? - 8th Apr 21
Microsoft AI Azure Cloud Computing Driving Tech Giant Profits - 7th Apr 21
Amazon Tech Stock PRIMEDAY SALE- 7th Apr 21
The US has Metals Problem - Lithium, Graphite, Copper, Nickel Supplies - 7th Apr 21
Yes, the Fed Will Cover Biden’s $4 Trillion Deficit - 7th Apr 21
S&P 500 Fireworks and Gold Going Stronger - 7th Apr 21
Stock Market Perceived Vs. Actual Risks: The Key To Success - 7th Apr 21
Investing in Google Deep Mind AI 2021 (Alphabet) - 6th Apr 21
Which ETFs Will Benefit As A Stronger US Dollar Reacts To Global Market Concerns - 6th Apr 21
Staying Out of the Red: Financial Tips for Kent Homeowners - 6th Apr 21
Stock Market Pushing Higher - 6th Apr 21
Inflation Fears Rise on Biden’s $3.9 TRILLION in Deficit Spending - 6th Apr 21
Editing and Rendering Videos Whilst Background Crypto Mining Bitcoins with NiceHash, Davinci Resolve - 5th Apr 21
Why the Financial Gurus Are WRONG About Gold - 5th Apr 21
Will Biden’s Infrastructure Plan Rebuild Gold? - 5th Apr 21
Stocks All Time Highs and Gold Double Bottom - 5th Apr 21
All Tech Stocks Revolve Around This Disruptor - 5th Apr 21
Silver $100 Price Ahead - 4th Apr 21
Is Astra Zeneca Vaccine Safe? Risk of Blood Clots and What Side Effects During 8 Days After Jab - 4th Apr 21
Are Premium Bonds A Good Investment in 2021 vs Savings, AI Stocks and Housing Alternatives - 4th Apr 21
Penny Stocks Hit $2 Trillion - The Real Story Behind This "Road to Riches" Scheme - 4th Apr 21
Should Stock Markets Fear Inflation or Deflation? - 4th Apr 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Sovereign Debt Worries Could Spur Gold Rally

Commodities / Gold and Silver 2011 Nov 22, 2011 - 10:57 AM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleU.S. DOLLAR prices to buy gold climbed to $1699 an ounce Tuesday morning London time – though still 1.5% down for the week so far – following yesterday's sharp drop which saw gold fall to a four-week low of $1668.

Sovereign debt concerns meantime continued to make headlines in both Europe and the US, as Spain saw its borrowing costs rise further and US politicians lamented the deficit super committee's collapse.

"[The] $1667.74 [level] underpins [gold] at present," says Commerzbank technical analyst Axel Rudolph.

"While trading above it on a daily closing basis, the medium term trend in the gold price remains bullish...failure here [though] will most likely be the beginning of a much deeper correction."

Silver meantime climbed to $32.03 per ounce – 1.1% off last week's close – while stocks and commodities also edged higher, following selloffs on Monday that saw the Dow lose over 2%.

Gold has now given up its gains for November – with prices to buy gold currently below where they started the month.

On the currency markets, the Dollar lost some ground against the Euro – though it remains 2.3% up against the troubled single currency since the start of November.

"Rising near-term uncertainty should be positive for gold," says a note from UBS today.

"Particularly if it hurts the US Dollar, though it is not clear whether the US debt issue will manage to distract investors from their fixation on Europe."

Spain paid an average yield of 5.11% earlier today when it auctioned three months Treasury bills – twice what it paid last month.

"Lower prices and higher yields are scaring investors rather than attracting new demand," says Gianluca Salford, fixed income strategist at JPMorgan Chase in London.

Spain paid an average yield of 6.97% last Thursday when it sold €3.56 billion of 10-Year government bonds. Quoted 10-Year yields, however, fell that day (though they have subsequently risen, hitting 6.6% this morning). 

The Financial Times explains that Spain asked data providers Bloomberg and Thomson Reuters to disregard the new bond when quoting their 10-Year benchmark yields and reference an older issue instead.

Monday evening brought confirmation that the US congressional 'super committee' has failed to reach an agreement on how to cut the country's deficit by $1.2 trillion over 10 years – with President Obama blaming Republicans' refusal to consider tax increases.

"They simply will not budge from that negotiating position," Obama said.

"So far that refusal has been the main stumbling block that has prevented Congress from reaching an agreement to further reduce the deficit."

"It is really discouraging," says former White House budget director Alice Rivlin – who has previously said Congress should be looking for $4 trillion in deficit cuts.

 "They could not agree even on the smaller challenge of $1.2 trillion...I do not see a way to get to the big deal before the [presidential] election [next year]."

Despite the talks' collapse, all three major ratings agencies reaffirmed their respective sovereign credit ratings for the US. Moody's, however, maintains a negative outlook, while Fitch – which said in August that super committee failure would likely lead to "negative rating action" – is due to complete a review of its US rating by the end of the month.

"[The] super committee's budget impasse still has potential to spur a gold rally," said a note from HSBC this morning.

"Emerging market and central bank buyers may take advantage of further drops [to buy gold] as they did in September."

Here in the UK, public sector net borrowing fell to £3.4 billion in October – down from £11.4 billion the previous month – data published this morning show. Despite the fall, however, forecasts due to be published next week by the Office for Budget Responsibility will suggest the government is behind schedule on its deficit-cutting targets, the FT reports.

China – the world's second-largest source of private gold demand – could post its first trade deficit for two decades in 2012, according to Xia Bin, an academic adviser to the People's Bank of China, the country's central bank.

"The US economy won't be good next year and Europe will be worse, meaning weak external demand for China," Xia told news agency Reuters on Monday.

Xia has repeatedly called for the PBOC to buy gold with its foreign exchange reserves.

In India meantime, a working paper from the central bank, the Reserve Bank of India, last month suggested that India too should look to again buy gold for its official reserves – and add to the 200 tonnes it bought from the International Monetary Fund in 2009.

The volume of gold held by gold-backed exchange traded products meantime – which include the major gold ETFs – hit an all-time high of 2339.97 tonnes last Friday, according to data compiled by news agency Bloomberg.

By Ben Traynor

Gold price chart, no delay   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules