RSBL Gold Silver Bars/Coins

Thursday, 12 January 2012

The "BULL" in the BULLIONS

I had mentioned in my earlier article that 2012 seems bearish for bullion. But it happened quite early, where we saw gold and silver plummeting in the year end.

However, it’s been a bullish start to 2012 for gold, as Gold Prices rally swiftly off the lows set late last year. And from here the market looks bullish.

Gold hit a four-week high and broke above a key resistance on Wednesday, defying a stronger dollar, as the festering euro zone debt crisis lured investors to its safety and signs of strong demand from the world's top two consumers also supported.

Gold bullion dealers reported strong demand from India on Wednesday, as the Rupee rallied 1.5% against the Dollar to hit a one month high. The weak Rupee saw record domestic gold prices in India last year, weighing on demand during what is traditionally a strong season for buying gold

Data showing record gold imports to China late last year has reassured investors that physical offtake is underpinning the market. China, the world's number two buyer of the precious metal, is preparing for the Lunar New Year this month, a key gold-buying period.

Gold is seen as a safe haven against many factors, including currency depreciation; sovereign debt default; inflation; economic ills; and even geopolitics. It's even a play on emerging market growth; China and India use the metal as a savings vehicle.

SPOT MARKET gold prices rose to a one-month high of just under 1647 per ounce Wednesday morning – a 5.1% gain for January – before easing back as the Dollar rallied on the currency markets

Its break to a one-month high of $1,646.90 an ounce has given investors more confidence to buy the metal, especially in light of improved demand in India - where the rupee's rise against the dollar has cut the cost of buying bullion for local consumers - and a sharp rise in Chinese imports.

Silver prices meantime rose to $30.31 per ounce – level with the week’s high and 8.6% up for the month so far – before they too eased back, while stocks and commodities ticked lower and major government bond prices gained.

Platinum group metals extended gains into a third straight day due to concerns on supply disruption in South Africa, as the national grid Eskom warned about extremely tight power supply in January.

Longer term, gold is not strongly correlated with any other asset. In fact, this is what makes the metal so appealing to many investors. For example, while gold has risen in each of the past 11 years, the US Dollar has fallen in only six of the past 11 years. Thus, gold has rallied while the Dollar has risen, and rallied while the Dollar has fallen.

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