The Daily Nugget: Gold To $1300 For Bernanke?

The gold price and price of silver both found support yesterday from a lower US Dollar index and Cyprus’ talk on gold. Both finished the day modestly higher.

Today Bernanke will face Congress as he gives his testimony on monetary policy and the economy. Markets will be looking out for hints regarding QE and whether of not it will be tapered this year. Many expect September to be the key date. Whilst Bernanke has hinted this in be past, last week he appears to favour a longer period until QE is wound back.

During Bernanke’s last testimony, on May 22nd, the price of gold rallied as he read out his prepared remarks. However as he answered questions, gold fell. Then, in a press conference following the June meeting of the FOMC, gold fell further as the markets read his comments as hawkish. Since then many have said Bernanke’s comments needed to be taken with a pinch of salt.

However Bernanke has continued to confuse markets after Bernanke, in a Q&A session said the US economy needed a ‘highly accommodative policy for the foreseeable future.’

The FOMCs next meeting is 30-31 July but no decision is expected to be made over tapering the bond purchases, instead speculators expect something to come from the September meeting. Therefore await at least another fortnight of the ‘will they won’t they saga’ which is likely to lead to another two months of a similar approach.

Standard Bank released a statement yesterday saying that gold demand was down from recent highs. The Standard Bank Gold Physical Flow index reached new highs last week but now appears to be cooling off. They also attribute this finding to a fall in premiums on the Shanghai Gold Exchange, “the premium for physical gold on the SGE eased towards $28.30/oz yesterday. This is down from a high of $37.06/oz on Wednesday 3 July and $36.37/oz on Friday 7 July.”

Indian gold imports to climb
Reports of increasing physical demand in both India and China are coming out of Asia. This will be supportive for the overall market, but unlikely to have as large an impact, in the short-term, as Bernanke’s comments and resulting speculation.

However, this morning on Bloomberg they report than gold imports by India are likely to ‘tumble’ in the second half following government curbs to gold investment. According to a median of extimates, gold imports are ‘may drop’ to 372.5 tons (fall of 22%) between July and September. Yet all is not lost, should this be the case then imports will still be up on the 860 tons in 2012, increasing to 902 tons.

Senator suggests dollar commission
Kentucky Senator Rand Paul has suggested the establishment of a commission which will study the debasement of the US dollar and whether or not a link to a ‘commodity’ would be a good idea.

He suggested this whilst at FreedomFest in Las Vegas. In an interview following his speech he would not comment on whether or not he thought a return to the gold standard was the answer.