By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD ticked higher in London trade on Friday, recovering half of yesterday’s 1.5% drop from new record highs above $1447 per ounce.
Silver prices also rallied, regaining a third of Thursday’s 3.2% drop from new 31-year highs above $38.20 – some 112% higher from this time last year vs. the Dollar.
European stock markets meantime gave back early gains, but neared the weekend 2.9% higher from last Friday.
The Euro currency meantime slipped back to $1.4130 – one US cent up on the week – as EU politicians signed their “comprehensive package” of stability fund promises, but Portuguese bonds fell sharply again, driving 10-year yields to new post-union highs of 7.80%.
Japanese authorities widened the exclusion zone around the stricken Fukushima nuclear plant, while British warplanes attacked Gaddafi targets in Ajdabiya, “where Libyan rebels are trying to retake the town,” according to the BBC.
A new “day of rage” brought hundreds of thousands of both pro- and anti-government protesters onto the streets of Yemen’s capital Sanaa.
“Continued conflict in Libya, growing focus on the European debt crisis and uncertainty surrounding the longer-term impact of the Japanese earthquake should keep investors interested in gold and silver,” reckons the commodity team at South Africa’s Standard Bank today.
But gold and silver bullion markets “temporarily seem tired of both [the Libyan and Japanese] stories,” says another London dealer in a note.
Data from TrimTabs this week showed US investors pouring record volume of cash into Japanese equity funds, doubling the previous 1-day record on March 16th – just 5 days after the earthquake and tsunami which killed at least 10,000 people.
With Spanish banks said to be “crawling with hedge fund and private equity people” in a bid to avoid a Madrid bail-out today, “At some point the currency market will wake up the Eurozone debt crisis,” says Standard Bank forex strategist Steven Barrow. “But for now, the market seems blinkered.”
“[Investors] don’t believe in the gold story anymore,” declared Kevin Norrish of Barclays Capital on Wednesday, announcing the bank’s latest commodity investment survey of institutional players.
“Not one single respondent” chose gold bullion as the likely best performer in 2011, Norrish said.
Crude oil – the survey’s top pick for 2011 gains – today ticked back through $105 per barrel of US West Texas Intermediate.
“Avoid gold appears to be one of the most striking messages of the poll,” according to Norrish. Some 60% of respondents also said they now favor active strategies in commodities, rather than merely buy-and-hold – up from 20% a year ago.
“As the financial market concerns that supported it in over the past two years fade, gold may now be in need of a new catalyst if its nine-year upward price trend is to be maintained.”
The People’s Bank of China’s new global outlook, releaesed with is 2010 review on Friday, warned that “the risks from European sovereign debt still remain and geopolitical risk may spread, which will give the US Dollar temporary strength [amid] general weakness.”
The 125-page report said commodity prices should be firm as “the recovery momentum of the world economy will continue,” but gold prices could retreat from their new all-time highs.
“With both Indian and Chinese central banks tightening monetary conditions, we would be surprised if gold demand from China and India remained strong this year,” says the latest weekly commodities analysis from French bullion bank Natixis.
“While few Indians would contemplate selling gold, rising interest rates are encouraging cash-strapped holders of gold to use the metal as collateral for new loans. We would view this as part of the process whereby tighter money leads to a less conducive environment for net new investment.”
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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