Gold Market

U.S. Global Investors Weekly (05/22/2009)
"For the week, spot gold closed at $957.35 per ounce up $25.55, or 2.74%. Gold equities, as measured by the XAU Gold & Silver Index (12) gained 10.68% for the week. The U.S. Trade-Weighted Dollar Index (13) decreased by 3.57%.

Strength
  • The World Gold Council’s latest report has stated that global demand for gold jumped 38% year-over-year in the first quarter to 1,015.5 tons despite jewelry demand having dropped 24% to 339.4 tons. Investment demand was the main contributor, having reached 595.9 tons in the first quarter, an increase of 248%.
  • Gold prices climbed above $950 per troy ounce for the first time in two months because of a combination of the dollar falling, dismal new U.S. housing data, and the prospect of the U.K. losing its AAA rating, all leading to a dent in economic stability expectations.
  • According to Factset Research Systems, more than 28% of the world’s largest bullion-backed exchange-traded fund is owned by hedge funds, as of the end of the first quarter of this year.
Opportunity
  • Brazil and China will work towards using their own currencies in bi-lateral trade rather than the U.S. dollar.
  • Bill Gross’s comments on perceived market concerns that the U.S. is on the same path as the U.K. and in danger of losing its AAA credit rating put the U.S. dollar, stocks and bonds under selling pressure.
  • Johnson Matthey has stated that platinum could climb to $1,350 an ounce in the next six months if investment demand firms and Chinese jewelry buying stays strong.
  • A senior research analyst at Richcomm Global Services has said that there may be increased demand from India, as the rupee has become stronger after recently elected Prime Minister Manmohan Singh vowed to revive economic growth.
  • A former White House adviser and a former chief economist at the International Monetary Fund argue that the U.S. needs more inflation to speed recovery to make it easier for "debt-strapped" consumers and governments to meet their obligations. They advocate 6% inflation for at least a couple of years. Such actions would send the dollar lower and would devalue debt relative to other assets, making gold a favorable investment relative to U.S. debt."

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