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Gold News & Press Comments
Our partial index of news and press articles about gold or coins.

Gold: How Low Can It Go?
September 2011 comment by Citywire Money, with additional reporting, comments from J.P. Morgan, Ross Norman...
We noticed two article on the same day with the same headline:

  • Gold: how low can it go? by Max Julius on Sep 28, 2011 at 00:01
    In a note titled ‘USD – the only port in this storm’, strategists at HSBC pointed out that the flight to the dollar took place even though there had been no improvement in the structural position in the US. ‘The only reason that the dollar has benefited is that no alternative safe haven exists,’ they wrote.
    And Yuen Low, mining analyst at Shore Capital, stressed the significance of the figures from China for investor sentiment. ‘If the Chinese data had been good, I think gold would have gone up,’ he said.
    He continued: ‘Looking at the way everything has been sold off, not just gold but shares and oil companies, my feeling is that this is really an indiscriminate sell-off.’
    Gold’s outlook
    Low said he expected gold to pick up again in the short term, adding that whether it breaches the $2,000 an ounce mark ‘really depends on what happens with the European debt situation, with the US economy and with the Chinese economy’.
    JP Morgan’s Gregson, for his part, also said gold was likely to rally. He branded demand for the metal as ‘a sort of battle between two camps of gold buyers’, saying as ETF investors pulled back the falls had generated ‘further strong physical buying out of Asia’, while the physical market in Europe for gold coins was still strong.
    ‘At the moment I don’t really see what competes with gold in terms of worries that investors have about the world,’ he said. ‘We’re still going to have very low US interest rates, we’re still going to have developed world economies that aren’t in great shape; and, therefore, why would you want to own their currencies?’
    Gregson, who works with Ian Henderson on his JP Morgan Natural Resources fund, a Citywire Selection pick, continued: ‘I think as a currency, gold remains supported, and as a risk hedge and a fear hedge, gold will continue to generate some appetite.

  • Gold: how low can it go?
    by Max Julius on Sep 28, 2011 at 00:01
    Gold prices shocked investors last week by plummeting alongside other assets perceived as far riskier, losing some of its allure as a safe haven. We look at the combination of factors that conspired to bring about that slump.
    Margin hikes and the ‘dash for cash’
    Hikes to margin requirements – the cost of holding positions – in the United States and China were a key trigger, as they tend to force the most highly leveraged speculators to liquidate.
    ‘We saw some ETF liquidation, and liquidation of speculative positions from the West,’ said Neil Gregson, managing director at JP Morgan Asset Management, referring to exchange traded funds tracking the gold price.
    Gregson, a senior member of the group’s natural resources team, pointed out that such occurrences were likely when ‘things start to go into panic mode’, as they did last week.
    The wild moves in gold prices did indeed point to panic: the yellow metal dropped from a peak of $1,786 on Thursday to a low of $1,535 an ounce on Monday – a three-day slump of 14%, or $251. And even on Tuesday, when gold recovered to $1,658, prices were still 14% off their record high of $1,920 three weeks ago.
    Ross Norman, chief executive of bullion brokers Sharps Pixley, said the losses were similar to the falls gold suffered following the collapse of Lehman Brothers in 2008, when ‘margin calls in collapsing equities were funded by the selling of profitable positions in gold’.
    ‘You could sort of say it was this dash for cash that happened post-Lehman’s,’ agreed Gregson. ‘It’s easy to sell something that’s gone up a lot, when you’ve got to make liquidations.’
    Operation Twist and the greenback
    Investors also responded last week to the $400 billion stimulus the Federal Reserve unveiled on Thursday, nicknamed ‘Operation Twist’, which will see the Fed buy long-dated government debt funded by selling short-term treasuries.
    Previous efforts by the Fed to prop up the US economy spurred gains in gold, amid fears that the measures would fan inflation and currency devaluation. However, the latest move did not spark such concerns as it did not involve increasing the money supply.
    ‘The decline in the past two weeks has fully unwound a lot of the bullish enthusiasm grounded in the market’s anticipation of QE3 or other inflationary Fed actions,’ said Tom Pawlicki, precious metals analyst at MF Global in a research note. He was speaking of speculation over a possible third latest round of quantitative easing – or printing money – by the Fed.
    Moreover, gold – like most other commodities – is priced in dollars, so a stronger greenback makes the metal more expensive for holders of other currencies. And on Thursday, the dollar jumped to a seven-month high against a basket of major currencies in the wake of the Fed move.
    Chinese data
    Yet another factor weighing on gold, and boosting the dollar, was a weaker-than-expected survey of manufacturing activity in China – which stoked further gains in the greenback as investors sought its relative safety.
    In a note titled ‘USD – the only port in this storm’, strategists at HSBC pointed out that the flight to the dollar took place even though there had been no improvement in the structural position in the US. ‘The only reason that the dollar has benefited is that no alternative safe haven exists,’ they wrote.
    And Yuen Low, mining analyst at Shore Capital, stressed the significance of the figures from China for investor sentiment. ‘If the Chinese data had been good, I think gold would have gone up,’ he said.
    He continued: ‘Looking at the way everything has been sold off, not just gold but shares and oil companies, my feeling is that this is really an indiscriminate sell-off.’
    Gold’s outlook
    Low said he expected gold to pick up again in the short term, adding that whether it breaches the $2,000 an ounce mark ‘really depends on what happens with the European debt situation, with the US economy and with the Chinese economy’.
    JP Morgan’s Gregson, for his part, also said gold was likely to rally. He branded demand for the metal as ‘a sort of battle between two camps of gold buyers’, saying as ETF investors pulled back the falls had generated ‘further strong physical buying out of Asia’, while the physical market in Europe for gold coins was still strong.
    ‘At the moment I don’t really see what competes with gold in terms of worries that investors have about the world,’ he said. ‘We’re still going to have very low US interest rates, we’re still going to have developed world economies that aren’t in great shape; and, therefore, why would you want to own their currencies?’
    Gregson, who works with Ian Henderson on his JP Morgan Natural Resources fund, a Citywire Selection pick, continued: ‘I think as a currency, gold remains supported, and as a risk hedge and a fear hedge, gold will continue to generate some appetite.

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