The price of gold ascended today after shedding close to 1.5% during a market selloff the previous day due to technical trading as options expiration come due the end of this month—and the recent sell-offs were triggered by computer automated sell-stops, where active traders make attempts to preserve their profits by being forced to sell. At the time of the writing of this note, gold was trading as high as $1344.60 an ounce, as the U.S. dollar index was losing 0.34% to the level of $78.94. Many investors were noted to be purchasing gold today at its current depressed prices, but a few chose to sit on the sidelines because of the uncertain Irish debt crisis and the effects that it may have on the Euro. The International Monetary Fund (IMF), and European Union (EU) are applying pressure on Ireland so that they take the bailout. The Irish finance minister is set to meet with officials from the IMF, EU, and the European Central Bank so that he may discuss his country’s options.
A factor that may soon contribute to gold prices is the possible threat posed by China raising interest rates in an effort to fight inflation. The World Gold Council released their gold demand trend report for the third quarter, which made note of the fact that global demand for gold grew 12% from the same period the previous year. Jewellery demand grew a further 8% because of a strong demand from emerging market nations such as China, India, and Turkey. Industrial demand for the precious yellow metal grew 13%, back to pre-crisis levels. The World Gold Council report said that demand in the fourth quarter will be even greater because of India and China.
The rapidly growing income levels of their citizens, and high savings rates of those populations will push gold to new heights. Head of research at bullionvault.com, Adrian Ash, said that "If you look at the Indian market, a lot of the Indian gold buying is mandated by the religion ... often in India that buying is done by the housewife. What you are seeing now ... is the husband in the house is now starting to look at gold as a physical investment." He predicts that we will see some massive purchasing of gold in India during the fourth quarter as the demand grew 36% in the third quarter alone as the rupee grew strength against the American Dollar.
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