By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD ticked higher for Dollar investors in London trade on Tuesday morning, but slipped against other currencies as world stock markets rose and government bonds edged back.
Copper reached fresh all-time highs, and other base metals hit 2-year highs, after new data showed Chinese manufacturing activity accelerating.
Silver prices kicked off February by touching 7-session highs at $28.50 per ounce.
“January has not been a kind month” for gold investment, notes Scotia Mocatta in its latest technical analysis, again reminding clients of the “bullish trend line on the weekly chart that comes in just below $1300” per ounce – a trendline starting just after the collapse of Lehman Bros. in Sept. 2008.
Priced against a basket of the world’s 10 most important currencies by economic weight, BullionVault’s Global Gold Index shows the metal falling last month for the fifth January since 2001.
Down 5.9% from Jan.1st, the Global Gold Index ended last month 21% higher from the same date in 2010.
“Rising tensions in Egypt have fuelled uncertainty and pushed oil prices higher, threatening the global economic recovery,” wrote James Zhang at Standard Bank on Tuesday morning.
Calling for this Friday to mark “Departure Day” for President Mubarak, today’s protests in Cairo “drew a far bigger crowd than we’ve seen in recent days” according to the BBC’s Egypt correspondent.
“[The Middle East unrest] has seen investors return to the relative safety of precious metals,” says Standard, “with some exchange-trade funds seeing a rise in gold holdings after last week’s consistent outflows.”
Gold investment through exchange-traded products shrank 3.5% last week, according to data from London’s VM Group consultancy, compiled for ABN Amro Bank.
But “What we’ve seen [in Egypt so far] has limited the downside more than anything,” reckons Andrey Kryuchenkov at VTB Capital, also in London.
“Technically, gold is still weak, also I think the investment community realizes Egypt is probably a temporary thing.”
Both the Euro and British Pound today rose to 11-week highs vs. the Dollar on the currency market.
That capped the gold price for Euro and UK buyers at €31,350 per kilo and £834 per ounce respectively.
Europe’s Brent crude oil benchmark price meantime rose above $100 per barrel for the first time since end-Sept. 2008, while new data showed the UK’s money supply and new mortgage approvals both shrinking unexpectedly.
The European Central Bank said yesterday that it has “suspended” emergency purchases of weaker-government debt. Combined with Monday’s stronger-than-forecast Eurozone inflation data, that led some analysts to suggest an ECB interest-rate rise ahead, reports the Financial Times.
The central bank continues to add liquidity to Europe’s banking system however, notes Commerzbank, by failing to withdraw the same sum of cash as it injected via short-term loans.
Back in the wholesale gold bar market – and with the Chinese New Year starting this week – “Chinese physical demand is non-existent at the moment,” said one Hong Kong dealer earlier.
“Volume is low, range is tight.”
But Hong Kong premiums for gold bars, however, held at their strongest levels above London’s benchmark prices since “at least 2004,” reports the Reuters news wire, “on tight supply and short-covering before the festive season.”
Running for two weeks from Thursday’s New Year, celebrations for the Chinese Year of the Rabbit have seen record shipments of gold and silver to the world’s second-largest single economy in anticipation of strong private consumer demand and gift-giving.
Adrian Ash
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 World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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