Daily Nugget: Gold Holds Out For Syria, NFP

Traditionally September is a positive month for the spot gold price, however this is unlikely to be a ‘normal’ September given that we start the month considering war with Syria, QE tapering and debt ceilings.

The war in Syria is currently the short-term driver of the gold price. As Obama seeks congressional authorization for military force, thereby delaying potential action, gold prices have fallen for the third consecutive session.

The price of gold bullion gained 6.3% last month, completing its second consecutive month of increases, as the talk of war saw more investors turn to the safe-haven. As a result the gold price hit levels not seen since mid-May.

Gold price and tapering

No doubt attentions will be turned towards the FOMC meeting this month. The September meeting has long been the rumoured event that will see the Committee agree to tapering QE in the coming months.

Given last week’s positive jobless claims data many now see tapering as a given in the near future, however the NFP due this Friday will no doubt be a hot-ticket in regard to the general sentiment over tapering.

In a survey currently running on The Real Asset Company website, respondents seem dissuaded from selling their gold bullion should tapering begin. Instead, they plan to either hold onto their holdings or add more to them.

Many gold bears believe the price of gold will tumble should tapering begin. However given gold’s 23 percent fall in the three months to July, thanks to speculation surrounding tapering, many argue that the FOMC’s potential decision has already been priced in.

Given the event of Non-Farm Payrolls at the end of the week, and ongoing debates over Syria, analysts expect the week to be a quiet one for both gold and silver, before Friday.

Policy meetings and debt ceilings

Speaking of central banks, three major ones are due to meet this week. The Bank of England, ECB and the Bank of Japan are due to meet this Thursday and will announce policy decisions shortly afterwards.

It’s not just about tapering in the US economy, the debt-ceiling is also expected to be reached in October. Should this be raised, say Citi, then it will be another step to gold’s ‘Stairway to Hell.’ Tom Fitzpatrick, analyst for Citi, believes that the US debt limit could be raised to as much as $22 trillion in the next three years prompting gold to climb even further.
Positive news for mining and silver prices

Mining strikes in South Africa continue to cause concern over gold supply. The strike will begin from tomorrow. According to Reuters the country has produced more than a third of the bullion ever pulled from the earth.

In slightly better news for the gold mining industry, Australian mining companies mined 5% more gold in the second-quarter of the year, compared to the same period in 2012. The country is the second-largest gold producer in the world.

Whilst gold fell overnight, silver prices rallied by as much as 1.9%. It is currently making gains thanks to the apparent improvement in the Chinese economy. Holdings in silver ETPs climbed to a record level last week, continuing the record climb seen since January.