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September Will be a Critical Month for Gold Investors

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

Gold and the external risky markets adopted a more cautious tone before Bernanke’s speech on 31 August 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 due to 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 due to 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 due to 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 percent rise over a year ago.

September will be a critical month for investors not only because of the Jackson Hole conference from 31 August to 1 September, but also due to 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 6 September when another bond purchasing program may be announced. The “Troika” will also decide if Greece has met the conditions for country aid while Germany will rule on 12 September whether the ESM is constitutional or not.

Austin Kiddle
Sharps Pixley, London

29 Aug 2012 | Categories: Gold

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