The Daily Nugget: Gold, SGE Hang Back For Bernanke

All four precious metals dropped this morning. The third day of a consecutive fall in the gold price came as speculators await to hear Bernanke’s testimony over the next two days.

The gold and silver price did find some support thanks to weaker than expected US data. US retail sales were expected to be up by 0.9%, instead an increase of 0.4% for June was announced.

Whilst gold has fallen by 6.5% since Bernanke’s hints that QE would be tapered, it then climbed to $1,298 following June 24.

Bernanke will be representing the FOMC in his testimony, views expressed will not be his own. Therefore, gold’s jump following the release of FOMC minutes that showed his dovish stance, is unlikely to happen again to the same level. Instead Bernanke is likely to work harder to reassure markets that they won’t pull QE away too sharply, or soon, but will look to various data releases for signals as to when is the right time.

Bloomberg speculates that physical buyers will ‘stay away’ from gold as it approaches $1,300, stalling around this level. I disagree, buying activities and large volumes on the SGE were evidenced prior to the further gold price drop on June 24th.

Yesterday, in the Social Gold Mine, we raved about palladium and its significant gains in the past few weeks. Typically the metal dropped by 0.2% this morning, it’s first drop in eight days.

The US Geological Survey released a report yesterday that showed silver mine output rose slightly in April. Production was up 3% on April and 8% up on a year ago.

Yesterday our Best of the Web discussed inflation, following on from that we bring you the highlights of a recent Doug Casey interview when Mr Casey describes the Fed as the ‘engine of inflation’. He describes them as this thanks to their money printing efforts – last year they bought up 90% of the US’s $1.2 trillion deficit.

The mainstream media seem to have suddenly picked up on the huge volumes and deliveries taking place on the Shanghai Gold Exchange. Yesterday Bloomberg reported on the fact that ‘physical gold delivered to buyers by china’ largest bullion bourse in the first half of the year almost matched the entire amount taken from its vaults in 2012, and was double the country’s production.’

We carried out a huge amount of work in this area and released the report last week. We’re pleased to see the mainstream media taking the baton. China’s gold demand will certainly be one to watch in the next couple of years, particularly as they’re set to take over India as the world’s largest gold buyer.