The Gold Prices Falling Because of the Fed

The Federal Reserve has brought down the price of gold this week as investors reacted to the announcement of the U.S. central bank, suggesting that it would progressively restrict its extraordinary support measures to U.S. economy. The ounce of gold and has tumbled nearly $ 100 in the space of a week, from Thursday even below the threshold of 1300 dollars. This is something that had not seen for nearly three years. Friday, the price reaches $ 1295.45, which is its lowest level since mid-September 2010. Perverse effect of supportive policies, the Fed now considers the views of official figures, the economic recovery appears to begin in the United States no longer justifies the pace with which it buys Treasury bonds and mortgage-backed securities. These are the operations that are currently around 85 billion Euros per month. However, the withdrawal of these liquidity injections, which dilutes the value of the dollar, greatly reduces investor concerns about a possible resurgence of inflation. Thereby making the purchase of precious metals such as gold is much less attractive. The barbarous relic while losing its safe haven qualities, strengths as a bulwark against the rising prices are having so little appeal.

Some analysts believe that gold is now in a vicious circle, the decline in encouraging investors to liquidate ETF (investment funds backed by physical gold stocks). Thus, the most important of these funds, has seen its shares fall below 1,000 tons of gold this week. However, these new gold ETF disbursements weigh themselves on courses, racing somehow the machine. Meanwhile, physical demand is affected by the measures taken by the Indian government. The authorities have indeed raised the customs duties on the yellow metal, while the rupee is at a record low against the dollar. Now, gold imports will be allowed only for purposes of jewelry making. In addition, importers must now pay for their purchases in cash, without payment facility. India believes that these imports represent a significant portion of its current account deficit. A policy should reduce gold imports during the month of June, while India is the world's largest consumer of the precious metal. Finally, on the London Bullion Market, an ounce of gold finished at $ 1,295.25 at auction Friday night, against 1391.25 dollars at the end of last week.

Dramatic Decline In The Price Of Gold!

In this month, the price of an ounce of gold has decreased by over 12%. This is the largest decline in the price of gold last 33 years history of gold. A decline in the selling price of gold, which affected the activity of buying gold from the counters of the jewelers around the world and it create a new rush in the bullion and gold coins across Asia and America. The ounce of gold traded in London at $ 1,790 October 5, (the highest price in the year 2012-1675), Friday, 12 April it was $1548 and on Monday and fell to $1416 before stabilize in the next few days between 1380 and 1400.

 Many explanations have accompanied the fall of the price of gold, some were optimistic and explained the decline of renewed confidence among investors in the economic and banking system as they no longer fear a collapse of the international banking system and no longer reluctant to put their money in financial products. So it is indeed signal the end of the crisis. Other explanations are much less positive considering that it is the fear of a resumption of the weaker global economy that was expected, resulting in less stress on the commodities market and therefore a lower risk of slippage in prices. Gold, he did not forget, is primarily a protection against inflation.

U.S. Probe of Gold Price Manipulation

The noose is tightening on manipulation of the price of gold and silver. According to some sources of the financial sector, U.S. regulators are investigating at the moment on possible price manipulation in the world biggest gold market. The Commodity Futures Trading Commission (CFTC - Commission control and regulation of U.S. futures markets) examines closely the method of pricing in London. The Gold price is decided by few banks who meet twice a day to fix the 'spot' price of troy ounce of physical gold, according to some sources. The CFTC focuses on transparency factors including pricing for both the gold market.

 No official investigation was opened according to sources. This study took place at a time when regulators are reconsidering larger scale criteria for financial references following a scandal involving the manipulation of interest rates. Three major banks have agreed to pay penalties totaling U.S. $ 2.5 billion following the alleged manipulation of the London interbank rate, or Libor practiced and where more than a dozen financial firms are still subject to investigation. Is the price of gold the most important market in the world was controlled by five banks? The gold price is fixed daily by a group of banks and plays an important role on the price of the jewelery industry. It determines the gains that will be going to the mining companies that are selling their raw materials to the refineries. This helps determine the value of derivatives whose prices are linked to metals. U.S. commercial banks had some $ 198 billion in contracts related to precious metals during the month of September 2012, according to sources from the Office of Currency Control (Office of the Comptroller of the Currency). CFTC's decision is alarming. The agency headed since 2009 by Gary Gensler, a former executive at Goldman Sachs Group Inc., has played a key role in the global survey of interest rates. Mr. Gensler has called for the analysis of the benchmarks that are subject to further reforms that would require them to be based on actual transactions rather than estimates submitted by industrial companies. Mr. Gensler is the co-chair of a working group of international regulators mechanism and in charge of examining these criteria and plans to publish a new set of guidelines in the spring.

 "The thought that widespread manipulation or tampering (interest rates) can spread leads us to ask questions about the veracity of other key points," said Bart Chilton, CFTC Commissioner at a roundtable on February 26 in Washington on financial benchmarks. "What energy swaps, the fixing of the gold and silver in London and the whole litany of 'bors' referring to Libor, Euribor and many others. In the case Libor, are traders who have provided false data to the industry organization in charge of publishing the reference rate with the aim of creating more profitability. Barclays PLC, Royal Bank of Scotland Group PLC and UBS AG have made regulations result in fines up to $ 1.2 billion, paid to the CFTC. CFTC leaders have said that if Libor drew their attention. The agency had previously reported a series of cases between 2003 and 2005 imposing sanctions on companies and contractors for trying to manipulate the price of natural gas by providing false information to companies responsible for energy rankings.


 The CFTC began investigating following complaints received from a number of investors in the summer of 2008. These worried indeed the sudden decline in the price of silver. And this could be the result from a manipulation or market malpractice. The CFTC has never confirmed or denied the facts relating to the investigation. A spokesman for the CFTC did not want to speak on this subject. Controlling binding factors of the market prices of gold and silver has long been a source of debate. According to Kurt Pfäfflin, precious metals broker at Daniels Trading in Chicago said that this has always been in the minds of those who lingered on theories conspiracy. He says he does not believe in price manipulation 'spots'. Price-fixing, dating back to 1897 in the case of silver and 1919 in the case of gold, takes place through telephone conferences between banks.

Calls on gold held from 10.30 to 15 pm UK time. Calls related to money held at noon every day. Fixing the price of gold in London involves five banks: Barclays, Deutsche Bank AG, HSBC Holdings PLC, Bank of Nova Scotia and Society General SA. Pricing involves money Bank of Nova Scotia, Deutsche Bank and HSBC. Methods of price fixing are "based rather on the basis of supply and demand until a price is determined. This method is fully transparent. Nothing to do with the Libor "said a spokesman for the London Bullion Market Association (LBMA), in charge of guidelines on the quality of gold and silver traded on the London market. It does not handle the money.

The price of gold a victim of profit-taking

Once is not custom, gold has not benefited Monday from its role as a safe haven. Investors seem to have the contrary "relieved" of their investment in the precious metal to cover losses in other markets. By mid afternoon, the price of an ounce of gold was trading around 1820 dollars, while prices went up Friday to 1885.90 dollars.

On Tuesday, gold had even reached a record high of 1921.15 dollars. A surge that has allowed some to reap serious benefits and allowing them to absorb the consequences of their unfortunate investments.
Let us recall that an ounce of gold was still up 15% in a month. The surge in gold is also hampered the last few hours by the renewed strength of the dollar, the greenback Monday reaching its highest level in six months against the Euro. A situation that makes it less attractive raw material purchases denominated in U.S. currency.

Still, the phenomenon could be a passenger, uncertainties regarding the euro area accentuated a little more each day. It should be noted as well as the largest gold funds listed globally, SPDR Gold Trust, saw the level of its holdings increase by 10.5 tons during the single day of Friday to reach 1,241 tons now.

Gold extended its record-breaking rally

The gold reached the record of 1500 dollars an ounce, It has never been a similar rise in the financial markets. With this crisis and expressed fears about the U.S. deficit and debt in Europe, investors prefer to acquire more gold to slow the risks.

It is obvious that holding gold resources does not yield large monetary benefit, but may qualify its holder as a good asset. In times of financial instability, investors are constantly looking for safe way to invest. The gold is the best immediate alternative for them. Hence this is the reason for this recorded historic outbreak in gold rate.

Since most of the global market is unstable this trend may continue and hence more procurement by the investors will lead to more price rise. In our neighboring country China inflation was reached 5.4% as on March 2011and hence their banks are required to increase the reserve and hence there is no immediate down trend in the price of yellow metal. The current crisis and un rest in African and Middle East countries are another main reason for the price raise of the yellow metal.

In relative point of view; the prevailing price of Gold is not expensive compared with the price of 1980 considering the inflation in price in mind. Even the poor man’s gold also rose to certain extent and the metal traders highly praise this metal.


However, all metals are not aware of such enthusiasm from buyers. The platinum price has not changed while that of palladium was down 6%. Their courses have been affected by the earthquake and tsunami in Japan.

Gold hits another record

The gold price has again hit a record on Friday, getting closer every day just over a threshold of 1,480 dollars an ounce.

Main factors leading to this historical rise were; the worrying situation of some of the member countries of the European Union beset by serious difficulties with their internal debt and sustained rise in inflation.

The price of an ounce of gold has risen to its latest peak on Friday in the international market, by breaking the previous Monday record.

According to the Analysts the investors in Greece, Portugal remained concerned over the threat of default, a situation that encourages them to buy precious metals, which are the safe-haven assets.

 The debt restructuring in Greek, Ireland also raised the new concerns and hence the raise in the precious metals.

On Friday, ratings agency of France lowered the rating two notches in their country alone.

Another main reason for this rise is; the Investors are alarmed of the signs of runaway inflation. Many European countries afraid, that their local market gold price will be in raise compared with the expected price in China and India. The sovereign debt and the inflations of some of the countries are the main reason behind the rise.

Because of the market instability, threat of default in certain European countries and inflation kept the precious metal price on its present high. You have put eye on the market trend for few more days to predict the trend of the precious metal.

Has the Gold prices topped out?

Ever since gold made a high around 1220 USD, it is declining from that level and recently it touched a low around 1050. Is this the high for another 5 years? or will it rally again above 1220 to make a new high in coming months? This is a million dollar question right now?

Almost all the fund managers and Analyst are bullish on gold and they are advising their clients to buy gold as investments. The consumption of Gold by China has exceeded the consumption of India. And it is being stated as one reason for the rise in Gold. And also it is been said by Market pundits that many central Banks would also start buying Gold for hedging purposes.

Irrespective of this, what does Technical Analysis say about future price of Gold. Technical Analysis would really predict the future course of the Gold Market. We have seen in many Markets, the top would be formed, when everybody is bullish. So once everybody has invested in Gold, surely the prices are going to decline. No market would continue to rally or decline forever. The markets need to consolidate while rallying or declining.

As the same case, the Gold market has to top out somewhere now or then. But going by the technical analysis, it says a top is already formed. So, in the future, Gold is unlikely to move above 1220 at least for another5 years. From here, it is going to decline further towards 800 USD in coming years.

Be careful when it comes to investing in Gold.

Will the downtrend in Gold continue?

Will the downtrend in Gold continue?

After testing a high of 1226 USD Gold has reacted from that high to test a recent low of 1100. A 126 USD decline is a significant decline from the high. Such a decline in the past 6 months was not seen.
Previously I have been advocating that we are developing a ‘Gold Bubble’ and it about to burst. Will this decline foretell the end of the bull Market in Gold.
One of the famous tools used by Analyst to forecast free Markets is Elliott Wave Principle. Based on the study using that tool, it points we are in the fifth wave of a impulse, which means we are in the last leg of the bull Market.
According to the theory, If this is going to be the last leg of the bull Market, then we are going to see a big decline for another few years to come.
Ok, If 1226 is not the top, then what will be the Maximum target for Gold. Yes, based on Elliott Wave principle, we can derive a target of 1400 USD in another 6 months period.
Whenever a commodity is largely discussed in Media, then that would mark the significant turning point of that Market. Gold is being discussed in all world media and it is the only commodity which is in limelight for the past one Year.
Last when Crude oil Prices were peaking, the same story happened. Media covered Crude oil daily and their focus was on Crude oil with analysts predicting 200 to 250 USD as price Target.
Now, the same thing is happening in Gold.
Let us wait and see whether History repeats itself……………..

Which is going to be the next Bear Factor?

Which is going to be the next Bear Factor?

The late 1980s bear market in the world Stock Markets were fuelled by the Gulf war and failure of East Asian Economies like Malaysia, Singapore, Hong Kong and etc. The bear market sustained till 1998.
The early 2000s bear market was fuelled by the dotcom bubble burst and also by the terrorist attack on WTC in USA. Then it terminated only on 2003.
The 2008 bear market was fuelled by real estate bubble, which impacted heavily the USA and also the World Economies. Since then it has pared some of it losses but still vulnerable for another bear attack.
If so, then which is going to be the biggest factor for the next bear market. May be it is real estate itself. As I believe the real impact of the real estate bubble is yet to be felt.
Another possible factor could be a Gold asset Bubble. Peaking Gold prices would lead to Bubble in days to come.
Let us wait and see…