In his weekly market review, Frank Holmes of the USFunds.com nicely summarizes for gold investors this week’s strengths, weaknesses, opportunities and threats in the gold market. Gold closed the week at $1,216.98 down $12.76 per ounce (-1.04%). Gold stocks, as measured by the NYSE Arca Gold Miners Index, fell 5.44%. The U. S. Trade-Weighted Dollar Index rose 0.63% for the week.
Gold Market Strengths China officially opened the Shanghai Free Gold Exchange on Thursday. By giving foreign investors direct access to its gold market for the first time, China is seeking to obtain more influence over prices while simultaneously boosting the global use of its currency, the yuan. In addition to the deregulation of the gold market in Shanghai, Hong Kong’s Chinese Gold and Silver Exchange Society was given permission to set up a precious metals vault in Shenzhen this week. The continued deregulation of the gold market by the world’s largest consumer is a huge boost to the precious metal.
In the first eight months of this year, Shanghai imported $15.98 billion of gold, a staggering indicator of demand in China. Furthermore, last Thursday, two tonnes of gold was imported into Shanghai, indicating that gold imports into the city are not slowing down.
China is planning on boosting its gold reserves. The country’s reserves, a mere 1.1 percent of total reserves, have plenty of room to grow if when compared to nations such as the United States and Germany, which hold roughly 70 percent of their reserves as gold. The increase in gold demand from Chinese central bank purchases should place upward pressure on gold prices.
This post was published at GoldSilverWorlds on September 21, 2014.