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Gold Down Slightly Due To Profit Taking

by Michael Locklear

chinese central bank Due to drops in the stock market in oil prices and a strengthening dollar, gold investors are selling off some holding and taking profits from recent record high prices. Gold yesterday reached its highest price since February 29 when it rose to $1779.50 per ounce. Shortly after the announcement that the Bank of Japan would join other central banks in initiating monetary easing policies and purchasing bonds in order to boost their economic growth, gold prices rose and then dropped slightly.

So far this month we have seen new policy announcements regarding bond purchases from the European Central Bank, the United States Federal Reserve and the Bank of Japan, investors now believe that China will be the next central bank to announce similar policies in view of diminishing manufacturing positions in that country. Gold market prices are fluctuating and in a holding pattern before while the market gathers its perspective. Meanwhile, stockpiles for gold exchange traded products reached a record yesterday when holdings increased to 2,519.263 metric tons.

The spot market price for gold has risen well above 9% in the euro has outperformed the dollar with its gains in near 6% since the European Central Bank announced that it would do everything in its power to preserve the euro by buying additional debt of other states in the euro zone. Last week Federal Reserve Chairman Ben Bernanke followed up on his earlier “grave concerns” remarks to announce that the Fed would initiate QE3 a new round of monetary easing design to improve the housing market and bring down the persistently high unemployment numbers in the U. S.. Now comes the Bank of Japan, that pledges to launch a $128 billion rescue fund to buy assets in order to shore up its struggling economy. On the sidelines waiting to inner the monetary easing ring is China, the contraction of the Chinese economy for the 11th straight month as their manufacturing sector continues to shrink, seems to indicate that the Chinese central bank will soon initiate new monetary policies of its own.

Gold benefits for monetary easing due to the pressure exerted on a long-term interest rates which in turn improves the mind environment for gold bullion and makes gold a more attractive hedge against anticipated inflation. These policies also boost liquidity and put downward pressure on the dollar. The spot price for gold today is at $1767, down slightly from yesterday. However, the optimism of gold investors still remain high as they gather their forces to push ahead with the next price increases some believe will take gold over the $1800 per ounce market and head toward $2000 per ounce or higher by year’s end. The rally in gold is strong and the market is pausing to develop the mindset it will take to push through the wall to the $1800 per ounce level. The field is changing every day more and more in favor of gold and the price will only continue to rise. There may be continued fluctuations before the next big push up, however there is a broad consensus both in the investor market and among gold-mining executives that the only place for gold to go is up. Can’t wait to see what happens tomorrow.

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