Gold Rises as Confidence in USD Declines

The U.S. has presented to the world a slew of data exhibiting a strengthening economy.  Elements such as unemployment figures, new job openings and corporate earnings have all recently drawn an upgraded picture of the American financial position. That image led to an upwardly mobile United States Dollar.

Bernanke & Monetary Accommodation

Commenting on a question following a July 10 speech in Massachusetts, Federal Reserve Chairman Ben Bernanke stated that the U.S. policy of monetary accommodation would continue unabated into the foreseeable future. That assertion indicated that the USD was not as strong as it had appeared to be, and that the economic recovery of America was fraught with continued instability.

The world of finance and investment was expecting the opposite. Expectations have a way of coming back to bite presumptions. While interest rates and the central bank stimulus package in the U.S. have remained unchanged, investors took sharp note of Bernanke’s words.

The Gold Market

Scrambling to find a more solid investment than the United States Dollar, many traders have turned to gold as a coveted asset. In fact, various trading platforms have caught the attention of speculative traders. Trading options such as margin trading, CFDs, options and futures are attractive investments when currencies appear to carry too great a potential for loss.

While the Federal Reserve seems to retain its current asset purchase policy indefinitely, evidencing an ongoing fragile economic recovery, the price of gold is enjoying a steady upward incline.

According to the NYSE COMEX, Gold prices have risen from $1,220 per 24K Ounce on July 7, to its current July 23 value of $1,335. The price of a 24K Gram on July 23 is US$42.84. By comparison, the 22K Gram is trading at US$39.28; 21K Gram – US$37.48; 18K Gram – US$32.13; 14K Gram – US$24.97; and 10K Gram – US$17.86.

Paper Price of Gold vs. Real Cost

China is amassing huge quantities of gold as an apparent hedge against volatile worldwide economic realities. Simultaneously COMEX inventories of gold are dwindling. JPMorgan has startled the commodities world by announcing an enormous 66% depletion in its total stock of eligible gold. The entirety of the scenario surrounding available gold is creating a chasm between the recorded price of gold and the actual cost of obtaining this particular precious metal.

Year-to-date worldwide gold production has seen a large percentage grabbed by the Chinese government. What this means in terms of the commodities market is a continuation in the rise of gold prices.

Investors Gauge US Central Bank Holding Policies

Investors throughout the globe have had two weeks to analyze the Fed decision to continue its economic stimulus policy. As home sales and corporate earnings data is scrutinized, traders have given a thumbs up to U.S. stocks, the yen and precious metals.

The main stock index in Europe and that of the U.S. have each risen 0.2%. Standard & Poor’s 500 is at a record high. The increase in Stoxx Europe 600 evidences the perception of a continuing economic stability in the overall region.

Gold dominates the financial story, as investors pour cash into the precious metal. The result is a rise that tops its performance in over a year. Until the end of the first week in July, gold prices had experienced a 2013 drop.  Bernanke attributes that decrease to heightened worldwide stability, yielding a diminished investment in economic safety nets.

However, the current sharp rise in the price of gold is a direct answer to Bernanke’s assurance of the Fed’s continued asset-purchase policy and the slower-than-expected economic growth in the U.S. economy.

Election Victory for Japan’s PM Shinzo Abe

The yen rose 1.1% against the dollar as the citizens of Japan handed Prime Minister Abe bicameral control of parliament. Abe’s campaign had been based on the concept of economic growth.

Gold, Silver & Copper

Gold trading closed on July 22 with a 3.3% rise, representing the greatest increase in the price of gold since June 2012. Copper likewise strengthened to its highest point in over a month, closing at $3.185 per pound. Simultaneously, silver took a leap of 5.4%.

Even though there appears to be a pattern of cautious global monetary growth, the ongoing fragile nature of that economic strength is consistently driving up the price of precious metals such as gold.