By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF physical gold and silver bullion rallied near record highs once again in London on Wednesday, while European stock markets slipped and crude oil rebounded to recover half of yesterday’s sharp losses.
The gold price rose back to $1435 while while silver hit $36.45 per ounce.
Eurozone citizens wanting to buy gold saw the price rise above €33,150 per kilo – just shy of what was then an all-time record high amid the Greek deficit crisis of June last year – as “peripheral” Euro bonds fell further, pushing debt-interest costs higher.
Portuguese bond yields hit to new record highs as 10-year Greek yields hit 12.85%.
Italian bond yields extended their rise above 5.0% – the highest level since the global banking crisis of 2008.
“China should increase its gold reserves appropriately, and must take every chance to buy, especially when gold prices fall,” said Li Yining, a senior economist at Peking University and an advisor to the national parliament’s Political Consultative Committee, quoted today by Beijing’s official Xinhua News Agency.
Li’s comments directly contradict Yi Gang – head of the politburo’s foreign exchange management – who last month repeated his view that Beijing should not switch a substantial portion of its $2.85 trillion currency reserves into gold, since it would send the gold price sharply higher in the process.
“The Chinese people will bear the cost at the end of the day as China is often the key buyer in these markets,” he said in Feb.
But Li’s view “may carry more weight than most,” says Reuters, because “many of his former students are now high-ranking officials,” including prime minister Wen Jiabao’s widely touted successor for 2013, Li Keqiang.
Meantime in North Africa on Wednesday, Libyan leader Colonel Gaddafi told Turkish television that a no-fly zone imposed by US or Euro forces “would be useful” in uniting his country – now descending into civil war – into fighting foreign powers instead.
In neighboring Egypt – where Gaddafi apparently sent a senior member of his government to “deliver a message” to military leaders today – hundreds of pro-democracy demonstrators in Cairo’s Tahrir Square were attacked with knives and machetes, according to state TV reports.
“The weak US Dollar and intensifying violence in Libya drove gold to a new set of nominal record prices,” says the latest gold investment analysis from Japanese conglomerate Mitsui’s London team.
“The metal remains in a well-defined bull channel with parameters at 1420 and 1451,” says technical analysis from Russell Browne, strategist at bullion bank Scotia Mocatta in New York.
“The potential risk is crude oil may continue to go higher, and if floods and drought happen again, we’ll face further price increases,” said the United Nations’ Hiroyuki Konuma in an interview.
Senior HSBC economist Karen Ward told Sky News in London that “even in the developed world I think we could see social unrest.”
“We have very, very low wage growth, so people aren’t getting more in their pay packet to compensate them for food and energy.”
“Speculators on Wall Street are using the [Middle East] unrest as an excuse to push prices up in the futures markets,” reckons Tyson Slocum, director of energy program at the US non-profit Public Citizen, and now serving on commodity-watchdog the CFTC’s new Energy & Environmental Markets Advisory Committee.
For US crude oil in particular, “There’s no supply-demand fundamentals that are justifying this huge price spike,” he believes.
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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