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Saturday, July 23, 2011

impact US. downgrade on gold prices

impact US. downgrade on gold prices : There are two factors that are driving gold prices up right now and each one has a reason for investors to be cautious," CPM Group exec Jeffrey Christian tells Mineweb. "On the one hand you have the macro economic factors, the US debt talks and the way - the extent to which the government in the United States seems to now be aware of the risks of its behaviour and the other one is Europe - those things, if the US government suffers a de facto much less a de jure, downgrading of its credit, that could have devastating consequences for the global economy and for everybody.

That could drive the gold price to $1,725. Now if they resolve these things and paper them over once more and that risk goes away gold doesn't go to $1,725, it could go to $1625 which is within $20 reach of where we are today - and that relates to the second factor which is you have the August Comex delivery period approaching and, as of yesterday, you had 28 million ounces of open interest in the August contract and that's going to have to be bought back on roll forward or delivered into and, between now and the end of July, that would cause upward pressure on gold. That's one of the factors there. Both of these things have risks for investors, so in the absence of the economic crisis you could see gold go up because of the Comex - in the absence of the Comex you could see gold go up because of the macro.

If the macro is resolved and the roll is behind us as of 1 August, both of those factors could disappear and take the legs off from underneath gold - I'll just say this, this is a very similar situation to what we saw in silver in April. In April you saw silver go from $37 to $49 and if you looked at the metrics people were not buying silver coins in particularly heavy levels - they were not buying silver through the bullion market or through ETFs. What was going on that was driving the price up was some futures purchases because of debt concerns in Europe and the United States and the roll of the May silver contract.


Gold ended the week at US$1,600/oz, up from US$1,594/oz a week ago. Silver climbed from US$36.71/oz to US$40.07/oz and platinum advanced from US$1,761/oz to US$1,791/oz.

Randgold Resources (LON:RRS) rallied from 5,465 pence to 5,595 pence over the past five days of trading, while FTSE 250 gold miner African Barrick Gold (LON:ABG) rose from 455 pence to 482 pence.

Blue chip silver miner Fresnillo (LON:FRES) surged from 1,625 pence to 1,681 pence.

However, FTSE 100 platinum producer Lonmin (LON:LMI) was headed in the opposite direction, falling from 1,345 pence a week ago to 1,331 pence. For the latest updates PRESS CTR + D or visit Stock Market news Today

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