So every day gold prices dip, yahoo finance cnbc or whoever blames it one the volatility of the whole greece situation. My question to you is how is a tiny country causing the price of gold to fluctuate so much? For the sake of lower gold prices, are we hoping that greece sticks to the euro or leaves the euro? comments appreciated
Although some may find other reasons, here is mine. Commodities like gold are denominated in USD on commodity exchanges. Similarly, the USD/Euro value ratio is trade in Forex ( Foreign exchanges) 24hrs world wide. If the trouble in Greece seemingly lowers the strength of the Euro ( common currency), the ratio goes up in favor of the USD. The USD is now stronger, so the amount of USD to buy gold goes down worldwide. Now if the world population thought that the USD was wrongly getting stronger, they could buy the gold at the USD ratio ( Using their Euros for example) as the better risk value and the demand would raise the price of gold even against a strong dollar. But the world seems to trust the strength of the USD at this time to go with it as a safe, fast, mobile way of securing value. Of course it could be a conspiracy ....
Greece is the litmus test for Spain, Italy, and Portugal as to how the Euro situation will play out. Anything that happens there will probably happen to these other nations, some of which have much larger economies. If Greece is staying in the Euro then risk-on, otherwise it's risk-off as they would default on their debts and a lot of banks holding that debt would take the hit, thus requiring they liquidate other assets to to fill the void. This would not only cause the price of all commodities to drop including gold, but the safe haven demand of the USD would also push down prices in dollar denominated terms as people flee the Euro. The market knows this and every time the rumor mill swings one way or the other it moves accordingly in anticipation. The powers that be also know this and use the rumor mill to their advantage. Gold's safe haven demand does not come into play right away because it takes longer for the average person who does not understand the nature of money realize it is safer than other paper alternatives.
actually what happens is all the algo funds get turned on when there is a scare story, they end up seeling the lows and buying the highs, over the past decade gold ahd been tied to low global rates/negative real interest rates. Those funds that are looking at a two week chart and saying gold and silver are down because the euro is down are very short sighter and have very small time frames. more and more of the quant/algo funds are going out of business each day. in my opinion if you look at a chart of gold vs the dollar vs a basket uf junk currencies ie puond, euro, yen, it has appreciated, while the other currencies run in circles. in the past few days gold has made a quintuple bottom going back to sept in the 1520-1535 are and silver in the 26.20-26.70 area. with europe about to unleash mutiple trillion euros people will have to get tused to the dollar goin up and gold and silver going up too. % years ago the dollar was in the same place approximately 81. silver was 11 and gold was 875. there is no real correlation beteen the dollar and metals. europe printing will drive metals much higher. also if you are to look at one currency which is important to gold aand silver check out the indian rupee. it has made historic lows for almost a month now. it is now bottoming so are the metals. thes prices last week will be the lows of the year. spec funds hold the least gold and silver they have since dec of 2008, you guys remember what a run we have had since then. sit tight buy the dip. sell at 37 and 1790 respectively..............fyi only..............qsilver007
