Gold Could See $1,800/oz On Seasonal Strength And Deepening Eurozone And U.S. Debt Crisis

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From Gold Core

Gold Could See $1,800/oz on Seasonal Strength and Deepening Eurozone and U.S. Debt Crisis

Gold is trading at $1,504.13/oz, €1,039.34/oz and £933.89/oz. 

Gold is higher today and showing particular strength against the euro
and the Japanese yen. The relief rally seen in equities since the
latest Greek ‘bailout’ is under pressure as S&P have said the debt
rollover proposal would be a “selective default”. The ECB may
selectively reject the S&P Greek downgrade and arbitrarily select
the best credit rating being offered.   

Gold in USD – 1 Year (Daily)

The risk of contagion in Eurozone debt markets and banking systems
remains. Portuguese, Spanish and Italian debt has been sold this
morning. Systemic risk from contagion in the credit-default swaps market
also remains a threat.

In the U.S. political squabbling over raising the $14.3 trillion debt
ceiling continues. However, it is likely to be resolved as the massive
liabilities incurred (not including unfunded liabilities of over $60
trillion) simply cannot be paid back. It is therefore likely that more
debt monetization (creating money to buy government bonds) will occur
leading to further currency debasement and the risk of stagflation and
severe inflation.

Cross Currency Rates

Gold's Seasonal Strength - July to December Could See $1,800/z Challenged

Gold has been supported in the traditionally weak “summer doldrums”
period due to institutional demand and strong physical demand at the
$1,500/oz level, particularly from Asia.

The summer months of June and July normally see seasonal weakness and it is thus a good time to buy on the seasonal dip. 

Gold is now entering its period of traditional seasonal strength which is seen between July and December.

Gold tends to take a break in October and then has a second period of
seasonal strength from the end of October to the end of December.

This has been primarily due to Indian religious festival, store of
wealth, demand in the autumn and western jewellery demand prior to

Since the liberalization of the gold market in China in 2003, demand
for jewelry and bullion from China for Chinese New Year (mid to late
January) is also becoming an increasingly important factor.

It is likely that seasonal weakness in equity markets, with both the
‘sell in May’ factor and tendency of stock markets to be weak and
occasionally to crash in October may also lead to safe haven demand
during this period.

As noted in the chart above, gold rose strongly (by 22%) from July
2010 to December 2010. This trend was also seen the previous year in
2009 when gold fell in June, rose marginally in July, was flat in August
and then rose strongly from September into early December.

As shown in the excellent Erste Group report on gold released
yesterday, the strongest months for gold are September, August and then
November (see table below).

Thackray's 2011 Investor's Guide notes that the optimal period to own
gold bullion is from July 12 to October 9. During the past 25 periods,
gold bullion has outperformed the S&P 500 Index by 4.7 percent.

"In GOLD we TRUST" - 5th Annual Special Report by Ronald-Peter Stöferle of Erste Group

While meeting clients and industry associates in Austria last week, I
had the pleasure of meeting Ronald-Peter Stöferle. We had a great
conversation about gold and silver bullion, the markets and the
challenges facing us today. He is very astute, knows his history and
understands monetary economics. 

Unfortunately we had to cut short our wide ranging conversation as he had to put the finishing touches to his excellent report. 

The report is extremely comprehensive and is an important read for
anyone wishing to properly understand the gold market today and why gold
remains a safe haven asset and an essential diversification.

"In GOLD we TRUST" covers the following highlights:

*    The foundation of a return to "sound money" has been laid
*    Guilt without atonement? Excessive structural debt suggests further appreciation of gold
*    Negative real interest rates continue to provide gold with perfect environment
*    No reason for "AUROPHOBIA"
*    Adieu "Exorbitant Privilege"
*    US Treasuries: from the risk-free fixed income paper to the risky no-income paper
*    Why gold is (still) no bubble
*    Excursus: the creation of money from the perspective of the Austrian School of Economics
*    Gold and silver as official means of payment vs. "Gresham's Law"
*    The monetary system at the crossroads - on the way to a new gold standard?
*    Gold as portfolio insurance
*    Renaissance of investment demand - institutionals as "elephant in the room"
*    Gold mining shares with historically low valuations
*    Risk/return profile of gold investments remains very favorable
*    Next target price at USD 2,000
*    At the end of the parabolic trend phase we expect at least USD 2,300/ounce

In our commentary section today -
, we feature an excellent interview between Lars Schall and Ronald and
we also feature Fuller Money’s synopsis of "In GOLD we TRUST". The
report itself was picked up by Zero Hedge yesterday and can also be read
in our commentary section.

Silver is trading at $34.71/oz,€23.98/oz and £21.55/oz. 

Platinum is trading at $1,723.25/oz, palladium at $764/oz and rhodium at $1,925/oz. 

Gold edges down on dollar gains, technicals weak

(Ottawa Citizen)  
Canadian mint cashes in after posting $2.2 billion in revenues

(The Telegraph) 
Gold and gems worth up to £14 billion unearthed from Indian temple

(Lars Schall)  
Schall Interviews Stoeferle: “Gold Will Continue To Thrive”

(The Globe And Mail) 
Gold entering its season of strength

(Zero Hedge)  
Moody's July 4 Bomb: Rating Agency Finds 10% Of Chinese GDP Is Bad Debt, Claims "China Debt Problem Bigger Than Stated"

(The Market Oracle)
Gold and Silver Investors, Don't Underestimate The Chinese

(The Telegraph)
Down on the Fourth of July: the United States of Gloom

Fuller Money on the Definitive Gold Report