For the holiday shortened week, spot gold closed at $929.80 per ounce, down $9.80 or 1.04 percent. Gold equities, as measured by the XAU Gold & Silver Index (12) fell by 2.64 percent for the week. The U.S. Trade-Weighted Dollar Index (13) gained 0.52 percent.

Key Research Points:

• Turkey, the world’s third-largest manufacturer of gold jewelry in 2007, imported 4.1 tons of gold valued at $125 million in the past three weeks as the wedding season boosted demand

• According to Reuters, Abu Dhabi June gold sales have risen 30 percent from the previous month. The jump is from holiday buying and sales expected to stay robust into the first half of July.

• Scotia Capital states that increasing levels of investment demand for gold bullion will continue and to expect strong activity in physical gold buying. The company also said there will be further inflows into gold backed exchange traded funds during the second half of 2009 and into 2010.

• Analysts suggest a falling U.S. dollar, rising commodity prices and the prospects of high levels of inflation should compel investors to own gold and silver to hedge against financial uncertainties.

• China, the largest holder of foreign currency reserves, renewed its call for a stable U.S. dollar and has proposed to include the topic of a new global currency at the next G8 meeting. The People’s Bank of China will now allow banks to undertake settlement of cross-border transactions between Chinese exporters in Chinese yuan and have offered tax breaks to exporters who make use of this new settlement option. These are negative factors for the dollar and may cause a spillover in bullion purchases as the dollar faces downward pressure.

Gold ETF (GLD)

gold-7609

Source: FusionIQ

Gold has risen from a low of 859 in April to a high of 989 last month. It has retraced close to 50% of that move recently and now appears ready to renew its major bull market up trend. This is being reinforced by the U.S. dollar, which is starting to break down, signaling that a bear market decline is just getting started. Support within the triangle consolidation pattern still stands near 90/91 on the GLD (our Gold market proxy).

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