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Weekly Gold Market Review – Week Ending 11th November 2011

Gold ended a mostly positive week ahead by 1.6%.

Once more, gold news has been dominated by European political and financial woes, which culminated with a focus shift from the troubles of Greece to the troubles of Italy. Italian bonds yields rose through the week to the perceived ‘bailout level’ of 7%, though with Italian politicians agreeing an austerity budget on Friday these eased to 6.53%.

In both Greece and Italy, the debt and economic problems coupled with pressure from the Eurozone leaders has resulted in the Prime Minister resigning.

The possibility of the creaking Italian economy being bought to its knees has prompted certain Eurozoe leaders to say that Italy is not just too big to fail, but too big to save. German and French leaders have been sounding out the option of moving to a two tear Eurozone. This having been said, however, it should be noted that the spotlight is broadening its beam, and France – where bond yields are at a post Euro high – could be next to be questioned by the markets.

Against this backdrop, the Euro fell to $1.3650 this week, though industrial commodities and oil posted gains.

After moving above $1800 an ounce earlier in the week, the gold price pulled back through Wednesday and Thursday as profit takers were seen and loose holders shaken out by the price falls. However, gold recovered on Friday to end the week at $1787.90 as volumes fell due to the Veterens day holiday in the United States.

Though the decline on Thursday was disappointing, Bloomberg’s weekly gold survey saw its most bullish result since its launch in 2004. This survey has been correct 58% of the time, and 21 and this latest release shows that 21 out of 22 analysts polled expect the price of gold to rise further over the next week.

In further bullish news for gold, call options on the SPDR Gold Trust now outnumber puts by almost 1.5 times, the highest level since August.

In India, the government said that it has noted huge imports of gold through October, a month where activity is usually subdued because of the Diwali celebrations. Imports hit $7.2 billion as against a monthly average of around $4.2 billion, and the cumulative figure for April through to October rose by 64% on the same period of 2010. This shift in emphasis by investors has been attributed to investors seeking assets that will protect their savings from the effects of rapidly rising inflation.

Finally, Nomura’s analysts have raised their gold price target for the end of 2012 to $2000 per ounce from $1800.

The outlook for gold is very strong.


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