Monday, April 13, 2009

Today in Gold: Monday, April 13

Each weekday, Cash4Gold will troll through the web's gold banter and post some of the bigger or more interesting stories. Following is a run-down of today's features:

"Gold, Silver Rise on Demand for Store of Value as Equities Ease"
Author: Pham-Duy Nguyen

Main Points: Gold for June delivery rose $12.50 today to finish at $895.80, the highest increase in three weeks.

The increase is seen as protection from potential bad news. Financial companies such as Citigroup and JPMorgan Chase are expected to announce their first quarter results this week.

"There’s some positioning ahead of financial results," said Matt Zeman, a LaSalle Futures Group metals trader. "Financials led us down this path, and they’re going to be the sector that leads us out. You might see the flight-to- quality buying in Treasuries and gold if earnings don’t meet expectations."

Analysis: The reaction can be seen as a way to hedge against potential losses in the event the news isn't good this week. If news ends up being positive, expect at least minimal decline in the gold price. Of course, the price of gold is low relative to global economic strength right now. The price compared to the end of 2008 in nearly flat, less some rather dramatic rises and falls in between.

"Now is the time to sell family jewels"
Author: David Robertson

Main Points: A combination of a high price of gold and tough economic times for many created the perfect environment for the selling of gold jewelry by customers. For the first time in 30 years, the amount of scrap gold sold (500 tons) during the first quarter of 2009 exceeded the amount of new gold purchased (420 tons). This is startling, meaning that instead of selling jewelry, many retail jewelers are buying gold back from customers.

The record for scrap gold sold was set in 2008 at 1,218 tons. That mark is likely to be broken this year, barring unforeseen circumstances.

The increased activity in the scrap gold industry has also likely contributed to the recent fall of the gold price back below $900.

"The sheer quantity of metal they are pumping into the market should even up the supply-demand balance and may even push it towards lower prices. That is why many analysts believe that gold will settle at about $700 to $800 an ounce this year with occasional spikes should Iran get belligerent or North Korea fires off another rocket."

Analysis: This is a very unique look at the contribution of Cash4Gold, Albar Metals, Argent, and other similar companies in the precious metals refining business. It's surprising that this angle hasn't been pursued more often. Why, during such historically bad economic times, won't the price of gold exceed $1,000 an ounce on a regular basis? We have heard some point to the struggling retail jewelry industry, which is certainly contributing. But the fact that consumers are selling more jewelry than they buy must significantly impact supply and demand, and should therefore be a major drag on some of these aggressive projections of a gold price far exceeding $1,000 an ounce.

No comments:

Post a Comment