While gold prices may not be showing it right now, the author of this article insists that gold will see higher prices soon. He goes on to say that QE3 is inevitable and gold will also see support as a safe haven investment by many investors.
Submitted by Tyler Durden
07/18/2012 09:15 -0400
Today's AM fix was USD 1,579.50, EUR 1,288.65, and GBP 1,012.57 per ounce. Yesterday’s AM fix was USD 1,595.00, EUR 1,296.85 and GBP 1,020.47 per ounce.
Silver is trading at $27.09/oz, €22.23/oz and £17.43/oz. Platinum is trading at $1,415.75/oz, palladium at $574.18/oz and rhodium at $1,190/oz.
Gold fell $7.80 or 0.49% in New York yesterday and closed at $1,581.70/oz. Gold dropped off in later trading in Asia and then recovered losses for the open in European trading prior to further weakness where it is trading just below $1,580/oz.
Gold hovered near $1,580/oz today after dropping marginally the previous session when U.S. Federal Reserve Chairman Ben Bernanke gave no clues of any monetary stimulus measures.
However the trading action was positive with gold falling sharply prior to seeing a v shaped bounce back to go positive on the day prior to weakness at the close.
Bernanke reiterated once again the stance that the Fed is prepared to take further action should the economic conditions worsen, but offered no clue on the timing of such action.
We have long said that the conditions would worsen and QE3 was inevitable.
Market participants and traders will wait for Bernanke’s testimony at 1400 today for more clues but those with a more long term horizon will again diversify on the dip.
Bullish for gold was the Fed chairman’s admission that policy makers are studying options for further easing that could be deployed. Tools available include further purchases of assets, reducing the interest rate on bank reserves kept at the Fed and altering its communications on the outlook for rates.
The Dollar Index, a gauge against six counterparts, fell for a fourth day.
Gold may also receive safe haven buying from the LIBOR scandal and crisis which deepened yesterday when Bernanke’s testimony conflicted with the Bank of England’s King and Bernanke appeared to admit that Fed employees were involved in the manipulation of Libor.
Bernanke said yesterday that “[In 2008] there was active effort to report to all relevant policy makers.” While King had said that “the first I knew of alleged wrongdoing ... was two weeks ago”.
Citi, Bank Of America, and JPMorgan appear to be set to be dragged into ‘Lieborgate’ as Congress is expanding the Libor probe to the big three U.S. domestic banks.
Also extremely bullish for gold was Bernanke’s admission that Libor is “structurally flawed” and an international effort would be needed to restore the rate’s credibility as the leading benchmark for mortgages, derivatives and corporate lending around the world.
The Libor scandal is further eroding confidence in the global financial system and will lead to safe haven gold demand.
While official inflation statistics continue to show inflation as benign, inflationary pressures continue to build – especially with regard to the essential that is food.
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