Fool's Gold Report: Bullion Prices Retreat; Is the Fix In for Gold?

Precious-metals investors still talk about the efforts of the Hunt brothers to corner the silver market, with their multi-year accumulation of the metal leading to a spike from $11 per ounce to $50 per ounce in late 1979 and early 1980. Nearly 40 years later, though, news of possible price-fixing in the London gold market was met with little fanfare, as April gold futures fell $10 per ounce, to $1,321.60, while May silver dropped $0.11 per ounce, to $21.24. The resulting drops of about 0.5% in the SPDR Gold Shares (NYSEMKT: GLD  ) and iShares Silver Trust (NYSEMKT: SLV  ) reflect how little importance gold investors ascribed to the news, even as many believe that gold is poised on the brink for a new bull-market move higher. Mining stocks were also little changed, with the Market Vectors Gold Miners ETF (NYSEMKT: GDX  ) down just 0.4%.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,329, down $3

Silver

$21.23, down $0.04

Platinum

$1,442, down $6

Palladium

$740, unchanged

Source: Kitco. As of 5:30 p.m. EST.

Why no one seems to care about price-fixing
The price-fixing allegations came in the form of an academic research paper that looked at the way in which five key participants in the gold market agree to their London gold-fix price. With a history going back almost a century, the major trading banks in the market meet each afternoon to set prices for the day, with the process involving a somewhat informal attempt to find a market-clearing price at which supply and demand reach equilibrium. The paper noted that the process isn't regulated, but that the resulting price has a big impact on the overall gold market, with implications for everything from jewelry prices to central-bank transactions.

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

Yet, the speeds at which information dissemination occurs, combined with easily tradable gold investment vehicles like the SPDR Gold Shares, have made benchmarks like the London gold fix much less important, at least on the investing side. That doesn't diminish their importance for industry players with contracts tied to that benchmark rate, but it does explain why news of potential manipulation didn't create wholesale destruction in the gold market today.

Demand is back
Meanwhile, another positive sign for gold came from Barclays today, which said that ETFs and other publicly traded products will see their first monthly inflows this month since late 2012. The inflows are relatively modest, but even small amounts of money coming into the market represent an important milestone in gold's overall recovery. At the same time, Barclays sees platinum regaining an even larger premium over gold prices, especially if continuing platinum supply constraints related to labor unrest in South Africa stay in place for a while.

Gold's gain of about $60 per ounce during the past month has been impressive, but investors shouldn't get used to gains at that pace. Even if prices take a pause in the near future, gold could still continue to recover over the longer run if investors regain confidence in its prospects.

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Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 01, 2014, at 7:49 PM, SSBN620 wrote:

    Russia just invaded Crimea, Ukraine, to preserve access to Odessa. The future of the free world now hangs in the balance, subject to the whims of a loose cannon named Obama. Hope for the best, but prepare for the worst. I just bought all the silver I could afford. You do what you think is best. Think carefully.

  • Report this Comment On March 02, 2014, at 2:55 PM, GaryDMN wrote:

    Demand is up and supplies are going down. Demand in Asia, primarily from China and India are at all time highs and supplies are falling. There was a big chunk of recycled old gold, collected at price high prices from consumers and sales of physical gold from some gold reserves, like the UK, that went indirectly to China, that has made it through the system now, but gold miners have slowed production, due to falling gold prices, even as reserves were falling. Now, we have a supply issue, that can't keep up with the demand.

  • Report this Comment On March 03, 2014, at 9:07 AM, TigerPack1 wrote:

    Later in the week, perhaps we will have to change title of this daily gold report to...

    "Fool's Not Holding Gold Report"

    BEN's PONZI scam had everyone believing nothing could go wrong,and the FED can solve every problem in the world. Oopps!

    Commodities skyrocketing again today, and U.S. DOLLAR is flat, as flight to safety is going on in hard assets, not fiat bogus paper asset creations. Oopps #2

  • Report this Comment On March 03, 2014, at 9:36 AM, TigerPack1 wrote:

    FED desperately needs to RAISE interest rates this week, if they want to avoid a DOLLAR collapse in value globally.

    Palladium and platinum are in process of breaking above long-term down trendlines in price this week.

    Broad commodity indexes are rising 1% or more daily and now above year ago levels.

    It will not be hard for YoY comparisons to be 20% or 25% ABOVE last April's lows, when we get another 4-6 weeks down the road.

    If Ukraine mess blows up on everyone, it could tank the Dollar not just the Rubble.

    FED will have no choice but to raise interest rates and crash the stock market to keep control of things.

    Food for thought, with your breakfast muffin, Monday morning. HMMM

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