The Gold Price Continues its Descent

Here in London, we wake up to cold noses pop the kettle on and make some toast; it’s a cold wintry day. Then we check the gold price today. We forget the coffee and burn the toast, it’s fallen below $1,100. Could this be the gold top we talked about the other week?

Are we really in the midst of an economic recovery?

Well if it is it’s a strange recovery.

As the dollar continued to tumble against other major currencies, investors looked to gold to offset the risk and loss in the dollar. But of late there appears to be resurgence in the dollar. It’s up to a three-month high against the Euro and a six-week peak compared to the Yen.

However, the U.S interest rate is still between 0% and 0.25%. The Feds are waiting, stalling. You see there cannot really be an economic recovery if unemployment is still so high. November’s unemployment rate is at 10% Down from Octobers 10.2%.

"The Fed typically waits for the unemployment rate to fall notably for a number of months before it is willing to raise rates, and we believe this should prove especially true with the unemployment rate at a 10.0 percent level,"
Barclays Capital’s economics team said in its weekly report on Dec. 11.

Banks are still in a pickle. With unemployment so high, people are unable to pay their loans. Capital One said its charge-offs, the loans written off due to the customer unable to repay the loan, increased to 9.6% in November. Bank of America and Discover also reported an increase in charge-offs for the month of November.

The repercussions can be felt right through the economy. If banks aren’t receiving their loan repayments then they’ll be less likely to lend money. If banks lend less, where’s the money that’s needed to drive our economy going to come from?

New businesses won’t be able to access the cash they need to grow and expand. Fewer businesses mean less employment.

Strange recovery indeed.

What are the Markets telling us?

Short sellers (people who bet against the rise in the gold price) are steering clear from the yellow metal with many anticipating a rebound. Over the last week we have seen the price of gold reach new record highs of $1,200 and plummet to below the depths of $1,100. The root cause of such volatility can be pinned to the rising value of the Dollar.

Check out John Tobacco from Locate Stock’s informative interview to Fox news about short sellers in gold on this you tube video. Short and to the point, it reiterates our opinion that gold will rise sometime in the near future.

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Until next week,

Digger
Gold Price Today

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Information in Gold Price Today is for general information only and is not intended to be relied upon by individual readers in making (or not making) specific investment decisions. Appropriate independent advice should be obtained before making any such decision.