After 3 days of lowering prices, which dropped to $1,434.15 an ounce on May 13th, gold regained strength today after luring some buyers, discouraged by the weakening of the greenback. That is the biggest intraday gain since then. Following the biggest drop in 33 years on April 15, gold has been steadily increasing its value throughout the next 30 days, peaking at $1,472.20 on April 20th. Nevertheless prices are currently almost 25% below the record reached in 2011.
The huge losses discourage retailers who buy and sell used gold to refiners to part with the metal they earlier purchased at a higher price. The so called “scrap” recycle volume – the amount of recycled used gold, dropped by 2.6% according to data from the World Gold Council in London. Recycling more than doubled in the decade up to 2011, when gold prices reached their all-time peak. Now it is quite the opposite. Dan Nektal of 46th Street Buyers in New York says: “Nobody is selling right now, and it’s survival of the fittest. If you bought at $1,700, how can you sell at the moment? Everybody’s presuming it’s going to go back up.”
The golds purchase volume increase was forecast by Huang Fulong, an analyst at CITICS Futures Co., who said ” Physical buyers backed off when prices neared $1,500 and we expect some of them to come back to the market after the recent price decline”.
Dollar weakness generally benefits gold as it makes it more attractive to investors. Another reason for the heightened interest in gold is the fact it is a dollar-priced commodity and a weaker dollar makes the metal cheaper for foreign currency holders.
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