Gold Updates

Gold is a natural hedge against sure shot future Inflation in an era of ultra-loose monetary policy. Comex Gold and Silver declined after a US economic data report showed a sharp decline in weekly U.S. jobless claims & late Wednesday news that the Standard & Poor’s ratings agency downgraded Spain’s credit rating to near junk status. The Euro currency sold off and the US dollar index rallied in the immediate aftermath of that news. The S & P move was a bit surprising to the market place, but not really a significant shocker to change the overall perception of Spain’s financial condition or the overall EU debt crisis. This in fact bolsters ideas that Spain will seek further bailout funds from the EU sooner rather than later. Labor Department figures showed yesterday initial applications for U.S. jobless benefits fell 30,000 to total 339,000 in the week ended Oct. 6, the fewest in more than four years. Reports also indicate that Indian demand for gold exchange traded funds – Gold ETF’s was at a record high in September, despite weak retail sales of gold jewelry in the country. Some heightened Middle East tensions supported Crude Oil, and did offset a bearish U.S. weekly DOE storage report. The open-ended nature of the QE3 promises Higher Inflation & that in turn promises for higher Gold Prices. With a lot of political manipulations coming into play now, a fresh rally in Gold seems to occur only closer to or post the U.S. elections now. Any news of fresh Bailout packages for Greece or Spain may trigger some movements, though even that seems possible only close to the month end or by early November. Any decline in Gold may be erratic and uneven as it is more susceptible to easing policies and less vulnerable to slowing growth concerns compared to other commodity movements. Gold will also garner huge support on all declines as Inflation seems absolutely unavoidable on the back of a limitless QE3. Inflation rise is now only a matter of time & Gold the only natural hedge. The central bank Gold purchases are expected to continue, especially by emerging market central banks who are looking to diversify their foreign exchange holdings. Rating agency Standard & Poor’s downgraded Spain’s credit rating by two levels, and now the country’s rating is only one notch above junk level. There is a greater chance that Spain will ask for financial aid and of the ECB having to make good on its promise to buy Spanish government bonds. This will push the Euro up & in turn trigger a rally in Gold prices.