Gold hit another record high last week and surged to a new record of 1,633USD on Friday. Theoverall trend moved upward, but the price from Monday to Thursdayfluctuated. Although the pricepushed higher, but it lacked of continuity and it was unable to hold. Then it hit to 1,628.50 on Wednesday, but retreated immediately to 1608.It dropped back to the low level 1,602.8 on Thursday. Since there were certain buy orders at 1600, it formed a support in short-term. After the price stabilized, it reached the record highon Friday, closing at 1,626.50.
Silver and gold's trend were different last week.Gold fluctuated at high level and retreatedon Wednesday, but it rebounded to a high record on Friday; while silver fluctuated and retreated last week. It opened at 40.40 on Monday and tested the weekly high level at 41.5. After that, it moved downward on Thursday and Friday. The weekly low level was at 39.30 and closed at 39.80 on Friday.
Gold gained support last week mainly from hedge funds and hedge buying.The U.S.Republican and Democraticargued about the increase of the U.S. debt limit so as to gain political supports.Both of them were uncompromising.This lose-lose political struggle turned to a stalemate.Once thebill of increasing the U.S. national debt limit is notpassed, the U.S. will not be able to repay maturingdebts from debt, i.e.the U.S. government was default, being regarded asbankruptcy. The credit rating of bonds therefore will be substantially reduced or even they turned into no-value. This debt default had a great blow on the U.S. economy, U.S. stocks and the dollar. Many people believed that this political struggle was a show for image only. Both the Republicans and Democrats did not want to bear the charge of bankruptcy so that the increase of the U.S. debt limit will ultimately be passed. However, due to uncertain factors, some investors have to buy gold to hedge the risk. Observed from the trend and price changeslast week, the price of gold quickly pushed higher after receiving buying orders, but it went weak quickly. It means although the price was high,market still lacked strong buying support.
Market focus will be the Congressdecision on the pass of legislation before the deadline August 2, which cannot be easily estimated. If the U.S.national debt limit does not increase, how will the government pay back due debts? The dollar may sell off, but the downgrade of the national debt will push up the U.S. interest ratedue to the lack of capital. The U.S. economy and the dollar will fluctuate according to the fluctuations of investor's sentiment and the market. So, risk is significant. Simply looking on the pricefluctuation, the gold volatility is estimated at1,600 - 1,640, but larger fluctuation at August 2 will not be unusual. Silver's volatility probably follows the gold, but the downward volatility is more likely to appear, which is estimated at 38.50 - 41.50. Investors should pay moreattention to thefickle trend inshort-term.
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