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August 01, 2010 at 04:00 AM
Frank Holmes
U.S. Global Investors
800-873-8637
Gold: For the week ending July 9, spot gold closed at $1,211.60 per ounce down, unchanged for the week. Gold equities, as measured by the Philadelphia Gold & Silver Index gained 3.14 percent. The U.S. Trade-Weighted Dollar Index fell 0.55 percent.
Gold ETFs took the number two spot for asset gathering in June, pulling in $2 billion. Also, in the first half of 2010, these funds led all funds in net inflows, pulling in $7.3 billion as investors continued to seek out a safe haven for their assets.
Gold demand in China gained 59 percent in the first half of 2010 due to declining stock markets, governmental efforts to cool the property market, and general unstableness of the global economy fueled investor actions.
Gold’s role as a reserve asset has been underlined as the Bank of International Settlements’ (BIS) record gold swap highlights its risk-free position. The fact that countries in financial distress have swapped rather than sold gold suggests that they want to hold on to gold in the longer term.
CLSA, an Asian brokerage and investment group noted “the only safe investment will prove to be gold bullion, since gold is the only asset which will protect purchasing power in both an inflationary and deflationary environment.”
Scotia Capital raised its short-term gold forecast to $1,500 and increased its long-term forecast by 14.7 percent due to its prediction of rising inflation and investors hedging against global debt and equity-market troubles.
GFMS, a respected precious metals consultancy group, said on July 7 that the price of gold could possibly reach above $1,300 driven by steady growth in investment demand.
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Dan Smith
Standard Chartered Bank
[email protected]
Base Metals: Base metals are moving in tandem, and the move to lower levels (in the last week of June) is worrying for bulls. The risk is that the pullback marks the resumption of a bear trend, and that key support levels will give way across the board. However, more likely is that the dips will remain limited, and upward momentum should be reestablished.
