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Nervous Investors Continue To Push Gold Down

by Michael Locklear

Due to weakness in the stock market and other commodities combined with continued profit-taking and a stronger dollar, has the spot price of gold down today by 1%. Gold is struggling as it tries to maintain its highs after the announcements by the European Central Bank United States Federal Reserve and the Bank of Japan, earlier this month.

The expectation of continuing low long-term interest rates and fears of inflation along with increased liquidity has pushed gold toward its nearly 6 1/2 month high over the last few weeks. Some believe that this rally could only result in a necessary period of correction within the market. It would appear that that correction is occurring now. As gold moves forward without additional pressures to push the price up it seems to level off in the lower range below $1750 per ounce for the time being. Now that all the monetary easing announcements have been made if gold is to move forward it will probably have to do so on its own momentum.

The spot price of gold today is at $1749.90 per ounce and we may continue to see more moves downward before it starts to move higher toward the prices that had been predicted recently by major analysts and banks. Although the price on the spot market is continuing to move downward the holdings within gold exchange traded funds continue to move upward. According to reports yesterday holdings of gold ETF’s rose by nearly 300,000 ounces to break its record by reaching a total holdings currently of 74.063 million ounces with SPDR Gold Trust seeing the largest increases in holdings.

Meanwhile, Newmont Mining Corp. (NEM) chief Richard O’Brien has said that investors buying gold as a hedge against inflation could push the price up to $2500 per ounce over the next three years. Central Bank demands may at least create a floor for gold prices in the $1600 per ounce range, according to O’Brien.

Gold has after all seen a stellar run over the last 11 years and reached a record price on September 6, 2011 of $1923.70 an ounce. Since gold exchange traded products and central bank holdings are expanding it is entirely likely that gold may still reach the projected price of $2000 per ounce by the end of the year as projected. Central banks have increased their holdings by 254.2 tons in the first half of this year and are expected to add an additional 500 tons by year’s end, this according to the world Gold Council. Analysts still believe that after this period of correction, which is really at the midpoint of the gold rally, gold will begin to climb again toward highs predicted earlier by bank and market experts.

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