By: Nicholas Larkin and Sungwoo Park
Gold fluctuated in London on speculation that investors will buy more metal as a protection of wealth and that yesterday’s price drop was overdone.
The metal, which reached a record $1,431.25 an ounce on Dec. 7, yesterday fell the most since Nov. 12 on speculation data showing recovering economies will curb investment demand. The euro declined against the dollar today amid concern that Europe’s debt crisis will persist. The Federal Reserve said the U.S. central bank needs to maintain its bond-purchase plan as the economy struggles to recover.
“Economic data has improved in the last few days,” Tom Pawlicki, an analyst at MF Global Holdings Ltd. in Chicago, said in a report. “We would still say that the economic recovery is immature. Any signs of economic slowdown could quickly boost metals prices once again.”
Immediate-delivery bullion lost 38 cents to $1,380.34 an ounce at 11:24 a.m. in London. Prices dropped 2.4 percent yesterday and today swung between a gain of 0.3 percent and a loss of 0.2 percent. The metal for February delivery was 0.1 percent higher at $1,380.20 on the Comex in New York.
Bullion fell to $1,382.75 an ounce in the morning “fixing” in London, used by some mining companies to sell output, from $1,388.50 at yesterday’s afternoon fixing.
Gold jumped 30 percent last year after governments spent trillions of dollars and kept interest rates low to bolster economies following the worst global recession since World War II.
Precious-metals prices rose as investors lost confidence in currencies and became more concerned about the fiscal health of euro-region countries including Ireland.
‘Fell Too Much’
Bullion will average $1,502 an ounce this year and climb as high as $1,780, refiner MKS Finance SA in Geneva said today in a report.
“Gold fell too much yesterday,” Chris Kwon, a trader at KTB Securities Co. in Seoul, said by phone. “Improving economic data appear to provide just some short-term weakness for gold. Overall, the uptrend remains intact as the U.S. economy is not in a full recovery yet and interest rates remain low.”
Improvements in the U.S. economy didn’t meet the threshold for scaling back the Fed’s plans to purchase $600 billion in bonds, the Fed said in minutes of its Dec. 14 policy meeting, which were released yesterday. Orders placed with U.S. factories unexpectedly rose in November and manufacturing in the U.S. expanded at the fastest pace in seven months in December.
Gold assets in exchange-traded products fell 3.95 metric tons to 2,094.77 tons yesterday, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,114.6 tons on Dec. 20.
Silver for immediate delivery in London fell 1.6 percent to $29.27 an ounce. It yesterday dropped 3.1 percent, the most in four weeks, after reaching a 30-year high of $31.2375 on Jan. 3.
Palladium slipped 3.2 percent to $753.78 an ounce. It was the best-performing precious metal last year with a surge of 97 percent and reached $807.75 on Jan. 3, the highest level since March 2001. Platinum was 2.6 percent lower at $1,712.75 an ounce.
All Things Considered – John’s Commentary
On Tuesday I wrote an article entitled “Bite the Bullet” which can be viewed here: “Bite the Bullet”
This article basically says the following:
- The European debt crisis lingers and may deepen, equaling more bailouts
- US recovery deemed insufficient by the Fed meaning more QE bond purchases, equaling more money printing
- Refiners and bullion banks are looking for higher prices
Action to take: Make sure you have made your initial purchase. If not, do it now. You can always add if we experience a deep pullback. You have not missed it if that’s what may worry you. There is far more upside yet to come. If you are waiting, this market will run away from us all this year.
What to buy: There are several gold and silver bullion items that sell at approximately 3% over spot insured and delivered. Distributors have new specials every week. Call if you are interested.
Quote of the day: “To prefer paper to gold is to prefer high risk to lower risk, instability to stability, inflation to steady long term values, a system of very low grade performance to a system of higher, though not perfect performance.” – William Rees-Mogg
