On Monday, the price of gold fluctuated on the NYSE as investors sought it as a safe haven due to concern regarding a faltering economic recovery. On August 19, gold futures reached their seven-week peak of $1,239.50, three percent below breaking a record. The gold price on Monday swung between a 0.2 percent loss and 0.4 percent gain.
The 19-commodity Reuters/Jefferies CRB Index has experienced a 5.5 percent decline this year. This reflects the continued attempts by the U.S. to dig its way out of the worst recession in recent history. According to Frank McGhee, head dealer with Integrated Brokerage Services LLC, “Gold will hold its bid, but it will start working sideways. There’s overall weakness in the markets on a slowing of the economy. You sell everything in this scenario, but the fear will come back and gold will catch a bid.”
Anne-Laure Tremblay, London analyst with BNP Paribas SA, stated, “Investors are increasingly worried about how much steam the economic recovery still has left. This uncertainty is supportive of gold at the moment.” She went on to say that though higher prices cause demand to subside, the prime season for gold jewelry is fast approaching.
During the week ending August 17, hedge fund managers increased their bets that the gold price will rise. Their predictions reflected the biggest estimated increase since April, 7.1 percent. The assets in the largest exchange traded fund with gold bullion backing, the SPDR Gold Trust, remained unchanged as of August 20. Current holdings are just 1.6 percent under the June figure of 1,320.44 tons, which was a record.
In other precious metals news, silver futures scheduled for December delivery rose 0.1 percent on the Comex on Monday. Platinum futures scheduled for delivery in October fell 0.1 percent and palladium futures scheduled for September delivery rose by the same amount. As word of a possible second dip in the economy gets out, it will be interesting to see how these precious metals react.
Source: Larkin, Nicholas and Pham-Duy Nguyen. Bloomberg Businessweek. Gold Fluctuates as Economic Outlook Slows Commodities Demand.