|ORO Y PLATA INTERNACIONAL S.A.
Gold: Four Reasons to Expect
28/08/09.The gold market typically ends its summer doldrums with a sharp
move higher as autumn draws in. Twenty of the last forty summers saw
the price dip before rising sharply to end the year higher, above both
January 1st and the spring peak.
Will the mode apply again in 2009? This summer sale knocked some 10%
off the February and June peaks in Dollars. For Sterling investors, it
offered the steepest discount to early-year peaks since 1992, as the
Financial Times noted last month, quoting our research here at
BullionVault. And now "Gold volatility is set to rise as we head into
September," reckons Walter De Wet at Standard Bank, writing a note to
clients Friday morning.
"The underlying price should move either up or down. We expect the
move to be higher."
De Wet gives four reasons.
1. US stock-market volatility is typically highest from September to
November, and is likely to spill over into other markets, including gold;
2. Jewelry demand in the fourth-quarter averages three times the third-
quarter demand, a seasonal pattern that "should remain, irrespective of
the actual level" and boost volatilty;
3. Standard Bank also expects the Euro to rise vs. a weakening US Dollar,
reaching $1.50 by year-end. Gold priced in Dollars typically moves in the
same direction as Eur/USD;
4. Finally, "The Gold Price at which the physical market is willing to buy
has increased steadily over the past few months," providing not only good
support but also reducing scrap-metal supply at higher levels.
Checking point one, volatility in US stocks retreated this August to a 13-
month low. Point three saw the Euro touch a 3-week high of $1.4400 today,
holding gold for Eurozone buyers below €663 an ounce – unchanged from
the start of this summer, just like the Dollar price.
Re: points two and four, however, putting a floor under gold doesn't mean
prices must rise. Speculative and investment trading remain the big
drivers, just as they were in the late '70s run and this decade's bull market
so far – and just as they weren't during the doldrums of mid-2009. The
odds of a late-third quarter surge, in short, depend on what happens
elsewhere – to stocks, credit, perhaps oil and no doubt the Dollar.