After seeing some increases to over $1400 per ounce, gold once again retreated in the last couple of weeks. It’s now steady around $1360 an ounce with several factors affecting current trends in gold priced in U.S. dollars.
First off, European sovereign debt concerns have been reignited by Ireland’s recent bailout plea to the European Union. EU finance ministers agreed to a bailout package on Sunday to help Ireland with its difficulties.
Europe’s troubles don’t end there sadly. Portugal may indeed be asking for a bailout soon according to some analysts. All of this of course comes on the heels of the Greek bailout this past May. Other countries like Spain and Italy may also seek bailouts in the future – we’ll just have to see.
While this is causing investors to seek refuge from the current financial instabilities in Europe, it’s also providing the U.S. dollar with a temporary reprieve as well. For the time being, the dollar is a more attractive option than the Euro.
Conditions like this pull gold in two different directions, which is most likely why we’re not seeing much change in the gold price today.
“The stronger dollar…has clearly put pressure on gold, and offsetting that you have people looking toward gold as a hedge against potential devaluation of currencies, and debt levels, and potential defaults,” comments analyst Daniel Major of RBS Global Banking & Markets.
Demand for physical gold – especially in Asia – re-emerged last week as the price bottomed out around $1330 per ounce. India for example yet again made another large purchase of physical gold recently.
“This is a strong indicator that there’s much residual physical demand in the system that will provide ample support on dips,” comments UBS analyst Edel Tully
On the supply side of things, Australia’s gold production rose 22% to 67 tonnes in the 3rd quarter. Australia is the world’s second largest gold producer after China.
As the holidays approach, you may be thinking about buying precious metals for a friend or loved one. Take advantage of the relative lull right now by investing in gold coins, bars and other precious metals like silver today.
