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By Mark O`Byrne
Precious metals analyst
Today's AM fix was USD 1,571.50, EUR 1,251.79, and GBP 1,005.70 per ounce. Yesterday's AM fix was USD 1,600.00, EUR 1,261.43, and GBP 1,017.17 per ounce.
Silver is trading at $26.95/oz, €21.57/oz and £17.36/oz. Platinum is trading at $1,438.50/oz, palladium at $603.60/oz and rhodium at $1,215/oz.
Gold fell $40.10 or 2.5% yesterday in New York and closed at $1,566.30/oz. Gold traded sideways in Asian trading prior to a very slight bounce in European trading.
Gold Spot $/oz Daily - (Bloomberg)
Gold may have its worst week in 2012 as it is currently down 3.5% for the week in dollar terms and nearly 3% in euro and pound terms. However, gold is still higher so far in June and the fundamentals suggest we have bottomed or are very close to a market bottom prior to a summer rally.
However, further short term weakness is possible as speculators go to cash and support is at $1,540/oz (see chart above).
Gold will be supported by safe haven demand due to the risk of contagion from European countries sovereign debt. There is the possibility of successive sovereign defaults like a child's game of dominoes.
The poor economic data should also support gold. Economic data yesterday showed euro-area manufacturing fell at its fastest rate in 3 years, and Chinese output was also down. Americans seeking jobless benefits have increased and existing US home sales contracted.
US economic woes are far from over. The Operation Twist program extended by the US Federal Reserve doesn't look like it will be the salvation to spur growth in the US economy.
We fully expect "QE3" to occur which will also be positive for gold.
Chris Powell, Secretary and Treasurer of the Gold Anti-Trust Action Committee told Bernie Lo on CNBC Asia overnight that central banks are continuing to manipulate the gold market as they are interested in supporting government bonds and the dollar and keeping interest rates low.
Powell warns about "paper gold" and says that we "try to persuade investors that if they are purchasing gold, they had better get real gold - metal. They should not get "paper gold" and keep it within the banking system."
He says that "there is huge naked short position in gold" and estimates that perhaps "75% to 80% of the gold that the world thinks it owns does not exist and is just a claim on a bullion bank that is underwritten basically by the central banks."
Bernie Lo asks what is the "end result"?
With regard to price Powell said that he does not make predictions but he wonders "what the value or the price of gold will be if the world ever discovers that 80% of the gold that it thinks it owns - does not exist."
"There may not be enough zeros in the world to put behind the gold price then."