Gold price shows signs of life

Better late than never, the price of gold has had a bit of a run over the last couple of days.

Many traders and investors would have assumed that the US teetering on the brink of a fiscal meltdown as it came perilously close to hitting its debt ceiling, coupled with the risk of a debt downgrade, would have been the catalyst to see gold charge higher.

However, many of the old rules that gold has been associated with appear to no longer apply. Arguably the aggressive weakness in the US dollar over the last 48 hours has also played a part in the gold price once again retaking the $1300 level.

Also brewing in the background has been a resurgent demand for the physical commodity to supply Indian and Asian markets. The balance of consumption over the last six years has shifted – India has doubled its annual purchase and Chinese demand has increased, and it is now three-and-a-half times more than it was in 2008. It is this hunger for the physical product that has helped stabilise the yellow metal’s price, as traders from the west have been happy to flood the market with paper exchange-traded-funds.

With equity markets looking set to have a run higher, certainly until the next round of US political-inspired issues, it are difficult to see the greater appeal of this security hedge.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.