RE: A Loss!==Gold MarketGold Market
For the week, spot gold closed at $902.40, up $17.55 or 1.98 percent. Gold equities, as measured by the Philadelphia Stock Exchange Gold and Silver Index (11), gained 4.6 percent for the week. The U.S. Trade Weighted Dollar Index (12) fell 0.28 percent.
Strength
- Gold futures surged late in the week as crude oil's rally to a fresh record high above $126 a barrel boosted the precious metal's appeal as an inflation hedge.
- Junior mining and natural resource stocks represented by the S&P/TSX Venture Exchange gained roughly 2 percent this week as current market strength appears to be expanding into the small-cap arena.
- The recent rally in the U.S. dollar subsided this week in response to rising fuel costs and growing inflation expectations.
Weakness
- According to a recent Kitco report, trading desks are still seeing weak retail investor demand for bullion and large-spec traders are continuing to sell into strength.
- Imports of gold to India have plummeted this year because of high prices, declining by 42 metric tons in the first quarter based on data from the Bombay Bullion Association.
- Additionally, sales for the annual Akshaya Tritiya festival, which normally sees large gold buying, may be down by about 40 percent this year, says MNC, a large bullion wholesaler.
Opportunity
- Gold may rally further in the near term as the ratio of crude oil-to-gold has reached nearly three standard deviations from the typical trading relationship, possibly suggesting that gold may strengthen to catch up with oil.
- The trend of producer dehedging continues as gold hedge books of major mining companies fell 18 percent to 22 million ounces in the first three months of the year.
- Gold and platinum miners sounded more optimistic about South Africa's electricity situation in their March quarterly reports, but they still warned that uncertainty about the sustainability of power supply made it difficult to forecast future production levels.
Threat
- Venezuela continues to block access to new gold projects and threaten other mining concessions in an effort to tighten its control of natural resource assets. Environmental Minister Yubirí Ortega said the country would not give permits for any open-pit mines and will not allow companies to look for gold in its vast Imataca Forest Reserve.
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