By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD rose back above $1250 an ounce for the second time this week – and the sixth time since May – on Thursday morning in London, as government bonds ticked lower together with energy prices.
Soft commodities rose, as did base metals and platinum. Silver prices touched a new 16-week high at $19.57 an ounce.
In the US, an article from Forbes magazine highlighting “Six Ways Retirees Can Beat Inflation” today does not mention gold investing.
“Gold has doubled since 2006,” adds a personal-finance video at Yahoo.com, sponsored by the Fidelity fund group. “This train left the station a long time ago.
“So before you pour your savings into gold, be careful…A lot of the money’s already been made.”
Asian stock markets meantime closed Thursday 1.5% higher, but European shares stalled after Wall Street closed last night with its fourth-best one-day gain of 2010-to-date on what one London analyst called a “rather selective” reading of Wednesday’s global economic data.
UK house prices today showed their second month-on-month drop in a row, while British manufacturing also contracted.
Swiss GDP growth jumped however to 3.4% annually, and the 16-nation Eurozone also grew faster than expected, with GDP rising by 1.9% year-on-year to end-June.
Inflation in Eurozone factory-input prices jumped from 3.0% to 4.0% per year in July.
Today the European Central Bank voted to keep its key interest rate on hold at 1.0% for the 16th month running.
Sterling and the Euro both fell vs. the Dollar, nudging the price of gold bullion up to £812 an ounce and €31,380 per kilo respectively.
“The maintenance of easy monetary policies and the likely reintroduction of quantitative easing policies provide the rationale for stable if not higher gold prices,” says London market-maker HSBC in a note today.
Reviewing interest rates outside the US, Eurozone, Japan and UK, “Many policymakers seem to have been surprised by the strength of growth in Q2, but are also somewhat skeptical that the strong pace can continue,” says Standard Bank’s chief currency strategist Steve Barrow.
The Reserve Bank of Australia – where GDP growth has jumped to a 3-year high – last raised its key lending rate in May at 4.50%.
Sweden’s Riksbank today raised its lending rate to 0.75%, saying that GDP growth will improve and labor demand look “substantially” better.
Over in India on Wednesday – where GDP growth for 2010 is pegged at 8.2% by Goldman Sachs’ analysts – local gold prices reached new record highs above 19,230 Rupees per 10 grams, The Asian Age reports.
“Apart from bad economic news globally, a weak Rupee is also pushing up prices in India” – home to the world’s hungriest gold-consumer market – the newspaper says.
Going into the traditionally strong autumn gold-buying season, “Gold consumption is expected to be strong in India this year,” says Kuljeet Kataria at Motilal Oswal Securities in Mumbai, “because the monsoon has been good.
“That should lead to higher rural incomes – places where there is no [formal] banking.”
“This demand from emerging countries – if it’s really going to stop and fall off a cliff, it’s going to be because of economic developments, not high prices,” says US Global Investors’ Frank Holmes, speaking last night to South Africa’s MineWeb.
Worldwide, “Gold is basically looked and perceived more and more as a safe-haven investment,” he adds. “The US, Western Europe and Japan are close to buckling under the weight of their own sovereign debt issues, and government budget deficits remain large and persistent and, as a result, the major paper currencies are low.”
The world’s seven most populous countries also have the strongest “emotional attachment” to buying gold, notes Holmes.
“The gold price could go up further…going into the Labor Day weekend,” reckons Jeffrey Christian of New York’s CPM consultancy, speaking to TheStreet.com and comparing this year’s action “to some extent to August of 2007, when gold didn’t really take an August pause.”
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.