Gold Market

U.S. Global Investors Weekly (05/29/2009)
"For the week, spot gold closed at $979.15 per ounce, up $21.80, or 2.28%. Gold equities, as measured by the XAU Gold & Silver Index (13) gained 5.79% for the week.

Strength
  • Recent moves in U.S. fixed income led gold to its highest level in 3 months and the dollar to its 5-month low. Analysts expect the Federal Reserve to increase the amount of treasury securities it will purchase to drive yields lower, pumping more liquidity into the economy and further swelling the balance sheet.
  • After an absence of two months, the world's largest bullion-backed exchange traded fund increased holdings to 1,118.76 tons, an increase of 13.14 tons, signaling renewed investment interest in gold.
  • The Ministry of Finance has identified that Japan's exports of refined copper in April rose 154% from a year earlier to 65,879 tons, helped by Chinese demand.
Weakness
  • Platinum and palladium fell as General Motors neared bankruptcy, but erased losses as GM and the Treasury Department reached an agreement with some of the largest bondholders to swap debt for equity. A reorganized U.S. auto industry may revive demand for platinum and palladium.
  • Despite gold investment demand having plunged more than 70% in Vietnam due to import restrictions in Q1, traders have sought permission from the central bank to lift the year-long import ban.
  • A U.S. Congress decision on IMF gold sales may be a week away. If allowed, the IMF could sell 403.3 tons of gold to leverage low-interest loans for low-income countries most hit by the global recession.
Opportunity
  • According to John Reade, UBS precious metals analyst, the main theme for gold in the near-term is no longer risk aversion, but dollar weakness. A weaker dollar and rising inflation expectations would represent the perfect storm for gold and likely reignite investor inflows.
  • China's Shandong province has unveiled a 3-year stimulus plan for the industry to optimize gold resources and increase output.
  • The Singapore Mercantile Exchange is on track to begin operations in Q4 and will aim to become a financial and commodities trading hub. The exchange will offer commodity contracts and derivatives, including gold."

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