Investors turn to gold in fear of a double dip recession

15th June 2010

Gold reached new highs last week on the back of sour economic news, investors’ ditched stocks fearing a double dip recession and bought into the yellow safe haven.

The US economy suffered the jitters last week as economic data pointed to a declining economy. The Commerce Department revealed a 1.2% fall in retail sales for the month of May, the first drop in 8 months. Consumer spending makes up 70% of total economic activity for the US economy making it a main driver of economic growth.

Consumers slashed spending in reaction to high unemployment and a weariness concerning the stock market. Americans acted to these woes with their wallets cutting back on clothes, food and building materials. Clothing stores saw a 1.3% fall, while, compared to the previous month, department stores dropped 1.8% in May.

On the back of this, the monthly employment record revealed that the US economy added 431,000 jobs last month, approximately 95% of these were attributable to temporary hiring for the 2010 census!

The markets responded immediately and stocks collapsed.

The double dip enthusiasts are following the news with ’I told you so’ looks on there faces. Delta Global Advisers Senior Market Strategist, Michael Pento, gives an interesting interview in which he explains his reasons for expecting a double dip in the economy.

http://www.youtube.com/watch?v=g17UX8FoPbY

The Gold Price

Meanwhile, the gold price hit a record all-time high last week of $1,252 per ounce in intraday trading, closing at $1,246. This follows records set this year in Swiss francs, the British pound and the Euro.

Gold is thriving on the back of the global economic crises.

However, investors are not rushing to buy gold jewellery with demand hitting a 21 month low. Instead investors appear to be turning to physical gold bullion, particularly the popular Krugerrand.

Rand Refinery Ltd., the world’s largest gold-smelting facility, raised production of Krugerrand coins to a 25-year high as Europe’s sovereign-debt crisis boosted investor demand for bullion.

Output last week jumped 50 percent to 30,000 ounces of blank coins for minting by SA Mint, Debra Thomson, Rand Refinery’s treasurer, said by telephone from Johannesburg today. That was the highest weekly production since 1985.

Thomson goes onto say that most of the demand is coming from Germany. The Germans seem to be ditching the Euro in favour of gold, using the metal as a safe haven from currency fluctuations.

The Krugerrand is evidently in high demand at the moment. Investors are in fear of  an oncoming double dip recession and are  steering clear of gold mining shares, which are subject to stock market fluctuations.

The need for having physical gold bullion in the shape of gold coinage has never been more apparent.

Good investing,

Digger
Gold Price Today

Important

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.