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Gold Price Holding Strong All Things Considered
Pinnacle Digest writes: Many of the market headlines today, specifically in respect to commodities, are focusing on the weakness in gold. While several media outlets are calling gold’s drop from last year’s peak-price a collapse, we beg the differ, and so does Adrian Ash.
When you consider all the negative market forces at work today, that typically would crush gold, including the flight to the US dollar, gold’s price has been amazingly resilient. There really hasn’t been much data to signal a bullish turnaround for gold, yet the precious metal remains strong and hovering near $1600 for months. Much like Rocky Balboa, gold keeps taking the hits and getting right back up.
Adrian Ash points to three main negative factors which, in most previous years, would have crippled gold; yet, somehow today, gold remains at historically high levels.
“First up, the US Gold Futures and options market. These contracts rarely run to physical settlement, but still they wag the dog of physical prices near-term. Because the price of gold for future delivery of course affects how much people ask or bid for metal today.
That future price, whether being set by hedge funds or chased by doctors and dentists (private traders risk getting "filled and drilled" by retail brokers, or so goes the joke), is bet on with borrowed money. So credit is a big factor. And credit has vanished since last summer's big peak in the gold price, just as did when Lehmans collapsed.”
Demand in India has dropped-off since the government initiated policy to slow gold bullion imports this year. Couple that with a collapsing Rupee and 30% of global consumer gold demand has been erased. As a consequence of this latest slowdown from India, China has surpassed it as the world’s largest consumer gold market.
Speculative short positions in the gold market are at the highest level since gold price was down at $400 per ounce!
Click here to read the rest of Adrian Ash’s article.