For the week, spot gold closed at $1,177.10 per ounce down $56.08 or 4.55 percent. Gold equities, as measured by the Philadelphia Gold & Silver Index fell 9.62 percent. The U.S. Trade-Weighted Dollar Index slipped 0.78 percent.
Strengths
- Japanâs largest trust bank, Mitsubishi UFJ Trust, is expected to develop the countryâs first precious metals ETF that will be backed by physical metals stored in Japan.
- Holdings in gold ETFs have touched record highs recently with asset levels approaching $50 billion.
- Peruvian mining GDP has risen 260 percent in the last two decades. In 2010, Peru will receive $14 billion in foreign investment for mining projects which will likely catapult them into the top five gold producing countries.
Weaknesses
- Dennis Gartman, author of The Gartman Letter and hedge fund manager, urged investors in gold to ârush to the exitsâ as bullion hit new highs. Due to the steeper and quicker than anticipated fall in the gold price, Gartman did suggest investors reconsider entering back into the gold trade later in the week.
- Gold tumbled more than $50 for the week and inflation data presented by the government that was absent of any price gains for April did not help.
- Spain approved its first public wage cuts, the deepest for at least 30 years, in response to the latest EU rescue package. If strikes similar to those in Greece occur the austerity proposals may lose political support.
Opportunities
- There seems to be no end to governmental opinions that more regulation is a certain way to improve the economy. German Chancellor Angela Merkel encouraged global economic powers to send a âsignal of strengthâ by agreeing to more forceful financial regulation. In the U.S., similar financial reform bills are being debated.
- Policymakers have cited the failure of capitalism as a need for new rules but none of these measures mandate confidence from investors. Weâre approaching a situation where the cost of regulation exceeds the economic benefits it was intended to create.
- Ken Gerbino highlighted on MineWeb.com this week many of the above mentioned concepts in his article âGold and Greece: Not what you thinkâ. He says investors accumulate 5 to 10 percent of their assets in gold and not be too concerned about the price.
Threats
- Recent sales on Akshaya Tritiya, the second-largest gold buying day in India, the worldâs largest gold market, were significantly low which could foreshadow subdued demand for the year if prices remain steady.
- Evy Hambro, manager of BlackRock Investment Managementâs $14.3 billion World Mining Fund, said âresource nationalismâ is an important risk miners are faced with in the near future. Countries such as Brazil, China, Mongolia and Africa are likely to follow in the foot steps of Australia and raise their nationâs mining taxes.
- Californiaâs largest public pension fund has asked for a $600 million injection from the stateâalready $19.1 billion in the holeâto shore up their shortfall in funding. Illinoisâ state pension plan, which has $78 billion in unfunded liabilities, is also hoping their state can put $4 billion into the plan in 2011. However, the state has a $13 billion budget deficit of its own.
