A bottom seems to have formed for gold around the $1,470 level. Gold has been able to maintain prices in a narrow band around this level, boosted by insatiable physical demand worldwide as mints in the U.S., Britain and Australia go into emergency mode to produce more gold coins and bars.
Volume has dropped off in the gold market, which could be attributed to prices rising off the “panic floor” of $1.334, or simply because there is so little physical product readily available. Negative economic news, especially in the U.S., is lending safe haven support even as the SPDR Gold ETF continues to lose investors and dump gold on the market. Other precious metals ETPs are not seeing the outflows that GLD is, and therefore are not seeing the same amount of downward pressure.
We are still seeing very significant volume in the silver market, which is more readily accessible to small individual investors than gold. The extraordinary demand for physical silver is being met more readily than for gold, though distributors are seeing a backlog of orders as mints and refineries kick into overdrive to meet demand.
Overnight, gold saw a small drop in Asia that was quickly regained on the London open, with prices jumping to $1,475. Prices in New York are mostly echoing yesterday’s range.
Stocks dropped on news that business activity in April fell – the first decline in over three years. The dollar, which had been trading nearly flat, dropped a half-percent against a basket of currencies. Stocks in New York began to recover on news of improved consumer confidence, and rising home prices.
In Europe, composite inflation is reported at 1.2%, a three-year low. However, composite unemployment has hit a new record. This has increased expectations of a rate cut by the ECB on Thursday. This expectation has helped Euro stocks and weakened the common currency.
Speaking of central banks, the Federal Reserve Open Market Committee is meeting today and Wednesday. The raft of bad economic news in the U.S. has most analysts expecting a continuance of the $85 billion a month bond buying.