By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD fell back towards Friday’s 1-week low in Asian and London trade on Monday, holding above €1000per ounce for Euro investors as Irish bonds rallied but the single currency continued to drag along 7-week lows to the Dollar.
US stock markets opened higher after their worst week in 3 months, as new data showed a surprise jump of1.2% in Retail Sales, plus a 0.9% rise in Business Inventories.
Following its worst week in only a month, the gold price in Dollars initially jumped in Asia to $1375 on Monday morning, with “bargain hunting evident” according to one dealer.
But it slid back to $1361 per ounce as base metals and emerging-Asia stock markets fell, and the US currency recovered a 6-week high to the Japanese Yen at ¥83.
The silver price in Dollars tracked gold closely, first rallying from last week’s 2.7% loss only to slip back below $26 per ounce, almost 12% below last Tuesday’s near-record peak.
“The Euro/Gold correlation has been seen breaking down,” says a London trader, “but not nearly to the extent that it did at the height of the Greek crisis – not yet, at least.”
“The [gold] market continues to trade alongside the single currency,” says VTB Capital’s Andrey Kryuchenkov in London, speaking to Bloomberg.
“[But] in the long run, gold is still looking positive…in case fears in the Eurozone escalate.”
Dublin’s government denied on Sunday night it was seeking European or IMF aid, asserting that Ireland is ”fully funded until well into 2011.”
“We must show clearly that Ireland can stand alone and it’s determined to get out of the financial difficulties we are in,” said Batt O’Keeffe, business minister,to Dublin radio today.
Gold investment demand in Germany –the Eurozone’s No.1 economy, where hotly-denied rumors say Berlin is pressing Ireland to accept a rescue – “again resurfaced after an exceptionally calm summer” in late Oct. and early Nov., says Wolfgang Wrzesniok-Rossbach at refining-group Heraeus in Hanau, “but it is still very far from its high volumes”of May and June’s Greek deficit crisis.
“Gold Bars of almost all denominations are in demand,” writes Wrzesniok-Rossbach in his latest published weekly report. “As far as the smaller bars are concerned, the coming Christmas season is probably drawing in buyers.”
Over in base metals, continued rumors of tighter monetary policy in China following last week’s stronger-than-expected inflation data forced Shanghai zinc prices 7% lower, triggering the market’s “limit down” block on further falls.
“Copper premiums in Asia have [also]continued to come under pressure,” writes Leon Westgate at Standard Bank.
“Ominously, its perhaps worth pointing out that the last time…Shanghai premiums [over London prices] were this low was in mid-April, shortly before copper fell out of bed and dropped from $7,500 to just above $6,000 in the space of 6 weeks or so.”
London copper futures slipped to $8,586 per tonne on Monday morning.
“Investors have become increasingly concerned about sovereign default and they think that most currencies should fall against the [Chinese] Renminbi,” says Danny Gabay at Fathom, an economics consultancy in London, quoted by the Financial Times.
“But since non-convertibility means they can’t buy the Renminbi, they buy gold instead, which can’t be debased.”
Research from market-development group the World Gold Council showed in March that Dollar gold prices were more tightly correlated with the Shenzen and Shanghai stock markets over the previous 5 years than with either crude oil or the GSCI commodities index.
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 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2010
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