London, 24 August 2010 - Gold recovered a little in overnight trade on Tuesday as the dollar weakened against the euro after data from the US that added weight to fears that the country’s recovery could be stalling.
Spot gold rebounded $10.10 to a session high of $1,235.50 per ounce at one stage, just below a seven-week peak hit on Thursday - it was last seen at $1,230.00/1,230.80, still up $4.60.
Upside level is last week’s high and then $1,244. A break through that mark should see the gold targeting all-time highs of $1,265.30 hit on June 21.
"Gold has been following the dollar’s movements again in the past few sessions after a long period of disconnection," a trader said. "Today’s disappointing housing data was had the effect of weakening the dollar and lift gold’s appeal... but the metal is still at risk of some more consolidation tomorrow."
Today’s weak data is only the latest in a series of negative figures out of the US, Europe and Asia - a clear sign that the world’s economy is still far from healthy.
"Interest rates are expected to remain at the current levels but global liquidity levels will be dependent on growth which if it falls can result in more liquidity creation measures and higher gold and base metals prices and lower stocks," consultancy Insignia said.
The NZ dollar dropped against the US as risk selling driven by extremely weak housing data in the US took effect against many assets. The Kiwi remained resilient however and is still holding above the .7010 mark
The spot price or spot rate of a commodity, a security or a currency is the price that is quoted for immediate (spot) settlement (payment and delivery). Spot settlement is normally one or two business days from trade date.
This is in contrast with the forward price established in a forward contract or futures contract, where contract terms (price) are set now, but delivery and payment will occur at a future date.
BIFLATION
www.en.wikipedia.org/wiki/Biflation
Biflationis a state of the economy where the processes of inflation and deflation occur simultaneously.[1] The term was first introduced by Dr. F. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment Group.[2] During Biflation, there's a rise in the price of commodity/earnings-based assets (inflation) and a simultaneous fall in the price of debt-based assets (deflation).[3]
The price of all assetsare based on the demand for them versus the volume of money in circulation to buy them.
With biflation on the one hand, the economy is fueled by an over-abundance of money injected into the economy by central banks. Since most essential commodity-based assets (food, energy, clothing) remain in high demand, the price for them rises due to the increased volume of money chasing them. The increasing costs to purchase these essential assets is the price-inflationary arm of Biflation.[4]
With biflation on the other hand, the economy is tempered by increasing unemployment and decreasing purchasing power. As a result, a greater amount of money is directed toward buying essential items and directed away from buying non-essential items. Debt-based assets (mega-houses, high-end automobiles and stocks) become less essential and increasingly fall into lower demand. As a result, the prices for them fall due to the decreased volume of money chasing them. The decreasing costs to purchase these non-essential assets is the price-deflationary arm of biflation.
There are a lot of arguments around this theory; the primary conclusion is that it is a cromulent way to explain the current status of the economy (especially the US economy) in its current state of flux.
DISCLAIMER: New Zealand Mint does not provide financial advice and does not employ financial advisors. Any opinions expressed within news articles are not intended as recommendations. If you are looking for investment advice, please seek independent, specific advice regarding your personal financial situation from a qualified professional.
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