Gold Market

U.S. Global Investors Weekly (06/05/2009)
For the week, spot gold closed at $955.25 per ounce down $23.90 or 2.44%. Gold equities, as measured by the XAU Gold & Silver Index (12) fell by 5.93% for the week. The U.S. Trade-Weighted Dollar Index (13) increased by 1.86%.

Strength

  • Spot gold prices have risen 14% in two months on account of growing inflation expectations due to the government's passage of aggressive stimulus packages meant to prevent major economies from falling to a deeper recession. During this same time window, the U.S. dollar has fallen almost 10% and has raised commodity prices across the board.
  • A Bloomberg article stated that the third-largest U.S. life insurer by sales has bought gold for the first time in the company's 152-year history to hedge against further asset declines. The life insurer has accumulated about $400 million in gold bullion.
  • Indian gold dealers and retailers have formed the Indian Bullion Market Association, which will provide a uniform price twice daily for gold sold in the domestic market. The purpose is to identify inefficiencies involved in the Indian bullion market.
Weakness

  • Thomas Weisel Partners analysts have shown that the average head grade for 80 major gold-producing mines has declined by 23% since the beginning of 2006 and suggest that lower grades have contributed an extra average cost-per-ounce increase of $81/oz or 45%.
  • India's gold imports so far this year remain around 47 tons, far below the imports of the yellow metal that the country had in 2008 of around 400 tons. Instead, India is processing high levels of recycled gold and has exported 30 tons of gold coins to Dubai this year.
  • The death toll from a fire at an abandoned South African gold mine has risen to 61 illegal miners, making it the country's worst such disaster. About 81 illegal miners have been killed in fires and other accidents so far this year. As a result President Jacob Zuma plans to focus on enforcing safety measures to curb mining deaths and the gold producer has suspended 57 workers for gold theft.

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