Gold price movement and the Euro crisis

Mr_Mumble

Gold prices are falling alongside equities today with the markets waking up to how irrelevant last Friday's 'fiscal compact' was:



But why would the supposed 'safe' gold trade suffer more than 'risky' equities? Here's the FT's John Dizard with an explanation:

It appears that the faulty plumbing connections in the euro area banking system are now creating something I have never seen before: a crisis of confidence in a monetary system that leads to a frantic sell-off in gold.

The partnership between the Federal Reserve and European Central Bank to provide hundreds of billions of relatively low cost dollars for euro area banks should have relieved the pressure to come up with greenbacks. Yet gold market people say European commercial banks are being driven to lend gold for dollars at negative interest rates just to raise some extra cash for a few weeks. There’s not a lot of transparency about where the banks are getting the gold they are lending out, but it could be lent to them by either their national central banks, or by gold exchange traded funds.

As James Steel, a gold market analyst for HSBC Securities (USA), says: “Until the funding difficulties at European banks are resolved, it is difficult for us to see any near term halt in gold lending. This may help keep gold prices on the defensive.”

Crazy.

PS. The Great British Krona seems to be doing okay given all the silly chatter about 'isolation':

nollag2006

Oh no !! I've just sold my high yielding property portfolio, and invested it all in zero yield bars of yellow shiny stuff. Was that wrong???

gfplux

A snapshot ( very nice copy and paste by the way) is never an accurate view of what is happening in equities or currency's

geneer

nollag2006 wrote: »

Oh no !! I've just sold my high yielding property portfolio, and invested it all in zero yield bars of yellow shiny stuff. Was that wrong???

You were about 5 years too late. :rotfl:

JonnyBravo

geneer wrote: »

You were about 5 years too late. :rotfl:

If only the same could be said about your property..... oh hang on..... :cool:

DiggerUK

If gold drops back to £950 an ounce, there will be something to get excited about......Don't forget it was about £900 a year ago.

It usually transpires that the price dips, as another stage of the economic crisis forces financial institutions to liquidise gold, for cash.

As the price hits others buy signals, then it tends to go skywards again.

Everybody else who knows the real value of gold just smiles if they have readies, and sulks if they don't.
..._

Darthvader

DiggerUK wrote: »

If gold drops back to £950 an ounce, there will be something to get excited about......Don't forget it was about £900 a year ago.

It usually transpires that the price dips, as another stage of the economic crisis forces financial institutions to liquidise gold, for cash.

As the price hits others buy signals, then it tends to go skywards again.

Everybody else who knows the real value of gold just smiles if they have readies, and sulks if they don't.
..._

I can not see Gold going much under £1000 oz, but here's hoping for a gift like that

worldtraveller

IMHO I don't really think that you need to get too technical about the price of gold. I said back in August that:

"...when I saw a post from someone on another thread on MSE earlier this week saying that they were thinking of taking out a bank loan to buy more gold I thought hmmm maybe the dumb money is now feeding a frenzy with the bubble due to burst....Hey, who knows? :think:"

Well, I'm pretty sure it has. The sheeple got in at the top, as they always do, and they were selling lumps of the stuff in supermarkets all over the world. But still, who know's? I've never invested directly in gold, but I do invest in a general commodity unit trust. It's looking good to maybe start dripping cash back in again soon with, as expected, general prices falling well back again. However, as I've said for some time now, I think that bigger falls in general commodity prices are probably likely next year.

Road_Hog

It was certainly pleasant to sell some scrap gold recently (9ct) and get £13 a gram for it. I missed the peak by a few weeks, but still can't complain. The problem with investing in gold is that most people get in when it's on the way up and not when people like Gordon Brown are almost giving it away.

As soon as the financial crisis recedes it will plummet in price just like it did in the '70s.

nollag2006

Road_Hog wrote: »

...As soon as the financial crisis recedes it will plummet in price just like it did in the '70s.

That fall has already begun.

Interesting to see the likes of brit1234 piled into gold in the past few months. Wonder how they're feeling now??

sabretoothtigger

You need to bring up at least a year chart for gold, theres nothing wrong with it this year or any other year.
It went up alot and now its falling alot, net difference is about 15% gain since Jan apparently so what is there to complain about.

This is why I stick to miners, I was reading a report from one this morning and their average sell price was 1634 this year. Great, its not the high but its above the price we're at now and they have already made the profit.
Really all that matters is the average over years not months and definitely not weeks


Right now gold is seriously challenging its regular pace of rises since 2009 but its still above prices recorded in the first six months of the year.
Im not sure who is selling, maybe its Hugo Chavez or the Libyan gold getting onto the market. Overall Im not doubting the main reasons why it should rise again which is weakness in currency and over-inflation of major bond markets

Whatever reason for the fall, it has to keep on reoccurring, it cant just be a one off lack of confidence that suddenly gold's rises are now incorrect.
Its the long term repeated effects that will matter for positive or negative markets

plummet in price just like it did in the '70s.

Ive heard gold price fell 50% in the seventies then it tripled or something silly like that. The price wont indicate that much especially if dollars are no longer accurate which is the main point for gold rising to begin with, its a circular argument. Needs much more reasoning