Gold traders see critical September ahead

After surging 3.3% last week, the U.S. Comex gold futures fell 0.35% to $1,667.40 on Tuesday, down 0.2% this week. The S&P 500 Index retreated 0.6% while the Euro Stoxx 50 Index declined 1.93% from their recent peaks reached about a week ago. The EUR/USD continued to climb this week to 1.2565 on Tuesday, after rising 1.44% last week. The CRB Commodities Index also maintained an upward momentum, climbing 0.28% after rising 0.84% last week. The Dollar Index carried on its losing streak, falling 0.27% after dropping 1.21% last week.

Gold and the external risky markets adopted a more cautious tone before Bernanke's speech on Aug. 31 at the annual gathering of central bankers and finance ministers at Jackson Hole. Global economic data appear weak. The U.S. Conference Board's Confidence Index fell 4.8 points in August to 60.6 which is the biggest drop in 10 months. However, house prices in the 20 cities in the U.S. showed the first yearly gain in June since two years ago. Japan has recently cut its country's growth forecast because of rising risks in several countries as well as the financial markets.

Marcus Grubb of the World Gold Council (WGC) expects the 2H 2012 to have a better demand outlook. While gold demand has fallen slightly in the first half, thanks to the plunge in Indian demand because of tax hikes, weakening Rupee and record-high gold prices, the seasonal increase in India from September to November could prop up gold demand. Central banks' continued gold purchase because of asset allocation reason has offset the lower consumption demand in countries such as India. In the first half, central banks bought 254 tons of gold, a 25% rise over a year ago.

September will be a critical month for investors not only because of the Jackson Hole conference from Aug. 31 to Sept. 1, but also because of the various announcements out of Europe. The ECB's President Draghi would not attend the Jackson Hole conference as he prepares for the ECB meeting on Sept. 6 when another bond purchasing program may be announced. The "Troika" also will decide if Greece has met the conditions for aid while Germany will rule on Sept. 12 whether the ESM is constitutional or not.

About the Author
Austin Kiddle

Austin Kiddle is a director of the London-based gold broker Sharps Pixley Ltd.

Comments
comments powered by Disqus
Check out Futures Magazine - Polls on LockerDome on LockerDome