Chinese Gold Buying Relentless!
- Gold hit record highs yesterday at about US$1487/oz and silver rose to another 31 year high of US$43/oz. I expect gold price to surge past US$1500/oz next week. Jim Sinclair’s target of $1521/oz is in sight. Silver could easily touch $45/oz before a minor correction and movement towards $50/oz, the all time high!
Chinese gold buying relentless
From the GoldMoney Dealing Desk –
The gold price bounced back yesterday, moving up to nearly $1,480 per ounce following a day of consolidation on Wednesday. Silver set yet-another 31-year high, breaching the $42 per ounce level.
Investors around the world are again looking for inflation hedges – a beneficial situation for gold. The Chinese in particular are suffering from inflation. Prices in the People’s Republic are rising at an annualised rate of 5.4%. Both the Chinese government and its citizens are looking to diversify out of paper money and into gold.
As analysts at JP Morgan have noted, the Chinese government’s efforts to dampen property speculation through raising property taxes and mortgage down-payment requirements has led to more gold buying from China’s citizens. This Chinese demand – both official and non-official – is providing very good price support for gold.
Gold received a substantial boost on Wednesday, when GFMS Ltd – a leading international metals consultancy – forecast that the yellow metal’s price will surpass $1,600 per ounce before the end of the year.
GFMS claims to be the only genuinely independent researcher of the gold market, as it’s wholly-owned by its company directors. In the past it has tended towards cautious price predictions, which makes this latest estimate all the more notable, and confirms the strength of fundamentals propelling the gold price higher.
The fiscal state of the USA is one such fundamental. On Wednesday it was revealed that last week’s budget compromise – that had supposedly led to an agreement to cut $38 billion from the Federal budget – will actually only lead to $353 million in government spending cuts before September. This does not auger well for any attempts at reforming entitlement programmes such as social security and Medicare, federal liabilities amounting to tens-of-trillions of dollars.
The dollar again moved lower yesterday, to just under 74.7 on the Dollar Index (USDX). Today sees the release of the latest Consumer Price Index numbers for the US, which will give an indicator as to the extent that dollar weakness is feeding into higher prices in America.
The greenback didn’t even receive a boost from renewed focus on European sovereign debt issues, following comments from the German finance minister Wolfgang Schaeuble that Greece may have to renegotiate its debt. Yields on Greek debt rose following the remarks. Greece is aiming to cut 23 billion euros-worth of spending in the next four years, in order to cut its budget deficit from 10% of GDP to 1%.
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