As fears of a global swine flu pandemic have continued to grow both in Mexico and around the world the price of gold hit an "intra day" high yesterday of $918 having already been given a boost by last Friday's revelation that China has been secretly raising its gold reserves by 75% since 2003, thereby confirming years of speculation that it has been stockpiling the metal.
The gold price is now just 8% below its all time high of $1000 last seen in February 2008. However, from a technical perspective the gold price has a number of price hurdles or "resistance" levels to overcome before we are likely to see this price once again. One of the biggest hurdles or resistance levels for the gold price is at the $960 price point which was last seen in March of this year.
In the meantime there are other equally compelling factors which may affect the price of gold in the short term and these include the increase in gold imports by India which may double this month from a year ago, as recent price dips revive demand for the Akshaya Tritiya festival when it is considered auspicious to buy gold. However, this year the demand seems to have translated into heavy demand for gold back ETF's (exchange traded funds) rather than for the physical metal.
The massive growth of gold backed ETF funds seems to continue unabated with the World Gold Council confirming that inflows into gold ETFs continued to grow throughout this quarter, with investors buying a record 469 tonnes of gold, dwarfing the previous quarterly record of 145 tonnes, set in the third quarter of last year. This took the total amount of gold in ETFs to 1,658 tonnes, worth some US$48.6 billion.
However, even as investors stampede into ETFs the gold market is signalling a possible shortage of gold bars as demand for the physical metal shows no sign of abating. The reason is fear that futures contracts and other forms of paper gold will simply not prove reliable in the event of a complete meltdown in the global financial system. Pure metal, whether Kruggerands, American Eagles, Maple Leaf coins or the "five tael biscuit" favoured by the Chinese carry no counterparty risk and have never been in more demand.
Just to the add to the above mix, this morning saw the gold price fall sharply by almost $20 on speculation that there is an imminent new cental bank agreement to increase the amount of gold that can be sold. The original limit of 500 tonnes was set under the "Central Bank Gold Agreement" which is due to end on 26th September 2009.
Anna Coulling
http://www.spot-gold-price.org
Comment and add to the story without registration, but keep the comments meaningful please. Links are not accepted.
