GOLD MARKET REPORT – September 23, 2011
Gold takes its worst daily hit in 24 years as “a slide turned into a free-fall” and lost $100, resulting in a loss of 9.7% for the week. Deepening fears of an impending global recession prompted investors to treat gold like any other commodity and sell to raise capital for cash and a rising dollar. Yesterday’s announcement from the Federal Reserve to swap out $400 billion in US debt did little to help raise public sentiment as investors viewed the move as “insufficient”. Today that feeling carried over, investors opting instead for a stronger dollar causing gold to lose its safe-haven appeal for the short-term.Despite this week’s heavy losses, gold still remains up 16% for the year thanks to earlier gains.
Oil followed suit with its positive correlation with precious metals and fell below $80 a barrel as pessimism took hold of the markets. Some of the losses were attributed to preliminary data being released from China showing a decrease in manufacturing - a gloomy indicator since China is the world’s leading consumer of commodities in general. Overall, crude slipped 9.2% this week (notice the close correlation with gold’s weekly figures) putting a skidding halt on its four-week winning streak.
Since the greenback is typically negatively correlated with commodities, it kept its promise and ended this week near its highest level since January. With the Fed’s dreary outlook and the Greek crisis creeping ever closer to a so-called “orderly default”, investors flocked to the dollar and US treasury bills to raise cash in a market that was decidedly disorderly.
With all the chaos and panic running around stock market investors’ heads today, perhaps they should take a breath and learn a lesson from the typical gold investor. He’ll be the one who’s smirking on the sidelines, waiting it out - slowly sipping his cup of coffee. A smart gold buyer typically invests for the long-haul and with all this going on, still has made a sweet 16% increase for the year.
At 17:00 (EST) the spot gold price was $1,657.30 (down $83.50 on the day)