Gold loses its momentum this week
Wednesday, 6 October 2010
LONDON, Oct 5 (Commodity Online): Gold has lost the momentum it received in the past one week and climbed down Tuesday as the US dollar has snapped back.
In the last US/European session, gold fell 0.1 per cent, breaking a six-session run of fresh record highs, as the US dollar posted modest gains against the euro.
But gold is still up about 10 per cent since the start of the third quarter, and in the last twelve months is up a third.
However, then yellow metal is no longer a bargain. Gold has continued to set new records in the third quarter, breaking through the $1,300/ounce level and hitting a fresh record at $1,320.80 an ounce last Friday.
Ongoing financial troubles in Europe and the US is ensuring that gold will stay strong and maintain its role as a safe haven investment.
Analysts are counting on gold prices rising by $70-$100 a year through 2015, far outpacing any increases in average industry mining costs.
Experts said it is no longer only about analysing gold's fundamentals, but also about analysing market psychology.
At the moment it seems that gold and other precious metals as a safe haven, are virtually the only investment vehicles that can be trusted.
Since the start of 2008, gold has stood head and shoulders above other major asset classes, appreciating by 58 per cent while copper is up only 16 per cent and oil is down 15 per cent over that period.
Historically, a negative correlation has existed between gold and the dollar. As the dollar weakens, the price of gold increases, since gold is denominated in dollars but widely used in global markets and by central banks of foreign countries.
The usual inverse relationship between gold and the dollar has showed signs of strengthening of late.
The 25-day correlation between the metal and the US currency has increased to a negative 0.4, the strongest inverse link since May.
The euro Monday toppled from its highest level versus the dollar in more than six months amid renewed concerns about the financial viability of euro zone banks, prompting investors to cut overly bullish bets on the euro, undermining the gold price in the process.
In the last US/European session, gold fell 0.1 per cent, breaking a six-session run of fresh record highs, as the US dollar posted modest gains against the euro.
But gold is still up about 10 per cent since the start of the third quarter, and in the last twelve months is up a third.
However, then yellow metal is no longer a bargain. Gold has continued to set new records in the third quarter, breaking through the $1,300/ounce level and hitting a fresh record at $1,320.80 an ounce last Friday.
Ongoing financial troubles in Europe and the US is ensuring that gold will stay strong and maintain its role as a safe haven investment.
Analysts are counting on gold prices rising by $70-$100 a year through 2015, far outpacing any increases in average industry mining costs.
Experts said it is no longer only about analysing gold's fundamentals, but also about analysing market psychology.
At the moment it seems that gold and other precious metals as a safe haven, are virtually the only investment vehicles that can be trusted.
Since the start of 2008, gold has stood head and shoulders above other major asset classes, appreciating by 58 per cent while copper is up only 16 per cent and oil is down 15 per cent over that period.
Historically, a negative correlation has existed between gold and the dollar. As the dollar weakens, the price of gold increases, since gold is denominated in dollars but widely used in global markets and by central banks of foreign countries.
The usual inverse relationship between gold and the dollar has showed signs of strengthening of late.
The 25-day correlation between the metal and the US currency has increased to a negative 0.4, the strongest inverse link since May.
The euro Monday toppled from its highest level versus the dollar in more than six months amid renewed concerns about the financial viability of euro zone banks, prompting investors to cut overly bullish bets on the euro, undermining the gold price in the process.