An Important Move for Gold

July 31, 2009 closing price US$ per ounce - $954.50

July 31, 2008 closing price US$ per ounce - $918.00

July 31, 2007 closing price US$ per ounce - $665.50

July 31, 2006 closing price US$ per ounce - $637.10 (July 28 actually)

Source: Kitco.com

Commentary: Gold has blown away its previous monthly July closings. Appears to be a bullish move in the longer term.

(excerpt from Bloomberg):

Gold Rises, Heading for Monthly Gain, on China's Demand Outlook

By Claudia Carpenter

July 31 (Bloomberg) -- Gold rose in London, heading for a monthly gain, on speculation rallying equities in China will lead to increased demand for the precious metal.

Chinese demand for raw materials helped the UBS Bloomberg CMCI Index of 26 commodities gain 25 percent this year. Gold purchases in China exceeded those in India, traditionally the largest buyer, in the first quarter, according to the World Gold Council. The Shanghai Composite Index of Chinese shares rose 15 percent this month, the biggest gain since August 2007.

"Gold demand is rising in China," said David Barclay, a commodities strategist at Standard Chartered Plc in London. "To the extent that the rise in the stock market represents more money in the system that would be positive for gold."

Bullion for immediate delivery rose $2.10, or 0.2 percent, to $936.50 an ounce by 9:23 a.m. in London, bringing the monthly gain to 1.1 percent. Gold futures for December delivery added 0.1 percent to $938.50 an ounce on the New York Mercantile Exchange's Comex division.

Jewelry makers usually stock up on gold after summer in the Northern Hemisphere for the wedding season in India and year-end holidays in the U.S. and Europe, according to Mark O'Byrne, executive director of Goldcore Ltd. in Dublin.

Gold has advanced 6.5 percent this year, lagging most commodities as investors sold the metal. It may drop to as low as $864 in the next two weeks before rebounding, O'Byrne said.

Chart of the Day

Today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 9.8 ounces of gold to "buy the Dow." This is considerably less that the 44.8 ounces it took back in 1999. When priced in gold, the US stock market has been in a bear market for the entire 21st century and is currently trading 78% off its 1999 highs. The recent five-month rally, however, has the Dow (priced in gold) putting in a significant test of resistance of an accelerated downtrend that began in mid-2007.

Quote of the Day
"The modern mind dislikes gold because it blurts out unpleasant truths." - Joseph Schumpeter