Weekly Gold Market Review – Week Ending 25th November 2011
Gold Falls for a Second Week as Debt Concerns Spread
Gold fell for a second week in a row, ending on Friday 2.5% lower than the previous week, as once more European debt concerns weighed on investors. The Thanksgiving holiday in the United States at the end of the week did nothing to help sentiment, and weakening currencies in the Far East combined with the bearish news from Europe to put further pressure on the yellow metal.
Equity markets have fared just as badly as the precious metals, with a tenth straight daily loss in the UK and Germany was narrowly averted on Friday as dealers squared books ahead of the weekend.
A worry going forward is that market observers may soon be shifting their focus from the debt problems of individual European nations to the continent as a whole. The ECB has been buying bonds of beleaguered countries in order to prop up balance sheets. At some time, and that time may be approaching more rapidly than many think, the amount of sovereign debt held by the ECB will start to be questioned. Such observations could send European markets into a deeper tailspin than currently being experienced.
Earlier in the year, the French and German governments had given backing and credence to the plan to set increase the size of the European Financial Stability Fund to €1 trillion. Behind this is the need for financial backing of lending by China and others. This now seems a long way off. Without it, the ability for the fund to work, and the ECB to continue to prop up member countries by buying their bonds comes into question. Germany’s Merkel, and France’s Sarkozy, have seemingly begun distancing themselves from the scheme. Contagion is becoming chaos.
Over in India, gold is hitting record prices in Rupee terms, thanks to currency depreciation against the dollar, and this is expected to push gold imports into the country to 1000 tonnes for 2011.
Whilst the gold price looks weak at the moment, such consumption could underpin the price and protect the metal from any lasting falls.
ETF Prices
| Ticker | Name | Price | Change on Week |
| IAU | iShares Gold Trust | 16.39 | -2.56% |
| DGL | PowerShares DB Gold Fund | 58.64 | -2.67% |
| GDX | Market Vectors Gold Miners | 54.79 | -3.98% |
| DBP | ProShares DB Precious Metals | 58.79 | -2.33% |
| GLL | ProShares Ultra Short | 17.47 | +5.18% |
| GLD | SPDR Gold Shares | 163.40 | -2.52% |
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