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Hello, I’m Martin Smith and this is your UFX Markets Week in Review. Today, we will
take a look at the biggest mover and shaker of the week: Gold.
Gold and even silver metals have been attracting worldwide interest to end this past week.
Gold advanced to a record high of $1,917.90 an ounce on August 23, only to drop by 5.60%
on the 24th as declining equities and the metal’s biggest weekly fall in more than
three months spurred investor demand before a speech by Federal Reserve Chairman Bernanke.
Owing to the optimistic traders who were selling gold, the yellow metal finished the week down
2.96 percent in futures for August delivery and dropped by 1.34 percent (versus the US
dollar) and was last seen trading at $1,826.83 per ounce.
Gold futures declined by as much as 11 percent after Gold’s biggest record was seen on
the twenty third. European equities fell and the US dollar weakened against most major
currencies as traders held their breath waiting for Bernanke’s signal for further steps
to support the US economy. He’s been quoted as saying that the Central Bank will keep
borrowing costs near zero at least through mid-2013.
Gold Bullion is in its 11th year of a bull market, the longest winning streak since at
least 1920 in London, as investors seek to move away from equities and a few currencies.
Before this week, gold climbed for 7 weeks back to back, the longest run of record gains
since April of 2007. The 5.6 percent drop on gold on the 24th was
the biggest decline seen since March 2008. Reports on durable-goods orders and home prices
beat our estimates and equities climbed, prompting an increase in margins on futures contracts
for a second time this August. The ten day historical volatility for gold futures this
week spiked to approximately 41 percent, the highest level since March 2009, according
to data compiled by Bloomberg. An 18 percent increase in worldwide gold prices
in the 2010/2011 year to a record around $1,500 an ounce encouraged miners to dig more mines
in Australia. Studies show that Australian gold production lifted by 10 percent this
year. The recent spike in gold prices has certainly drawn attention to the industry,
but it is the sustained, longer-term upward trend in the gold price that has prompted
companies to re-evaluate older deposits, successfully redevelop them and also explore for new ones.
China is the number 1 world-largest gold producer, Australia coming in second, mining 345 tonnes
in the 2010 year and we, of course, expect a higher yield from China in 2011.
Here at UFX, we’ve found that the lower equities seem to be giving support for gold
as a safe haven and as prices rise so does the scale of volatility – investors have
been on the lookout for a bargain after this week’s drop. That tells us that despite
the uptrend being firmly intact, you should expect aggressive corrections while moving
along. Gold is well supported in the short-term. Well, that is all the time we have for today.
I hope you’ve enjoyed this week’s ‘gold review’ and I hope you will join us next
week. Until then, be sure to visit us at UFXMarkets.com for all of your online trading needs. For
UFX Markets, I'm Martin Smith. Good luck, and happy trading!