The gold market is one of the more interesting markets to watch, mostly because it has so many emotional supporters that often times cloud the issues. But alas, the gold markets succumbs to the law of supply and demand just like everything else. As a recent article on CNN.Money.com demonstrates.
Probably the biggest issue on the supply side is the sale of gold by central banks in Europe. The ECB said it had sold 37 tons of gold from its reserves over the past two months and had no plans for further sales in the current year of the central bank gold agreement.
European central banks pledged to cap their total sales at 2,500 tons in the 2004-2009 period, or 500 tons a year. The third year of their five-year agreement runs until Sept. 26.
. . . . the ECB's announcement had lifted sentiment, but other central banks were expected to continue selling gold from their reserves.
When gold is denominated in dollars it will be fairly dependent on the value of the dollar, just like oil.
. . . . "[Gold] will probably continue to be fairly dependent on the dollar," . . . .
"There are various different influences in either direction but at the moment none of them look to be heavily dominant."
On the demand side, for example:
Gold imports by Turkey, one of the world's top consumers of the metal, fell around 12 percent in the first five months of the year to 74 tons from a year earlier.
Don’t forget that is still subject to speculative moves.
. . . . short covering emerged after confirming solid buying interest below $650 this week.