By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF PHYSICAL gold bullion rallied 1.2% against the Dollar and 0.8% against the Euro in Asian and early London trade on Monday, rising as “buying poured into the market” after the weekend’s inconclusive G20 summit, according to one Hong Kong dealer.
“It was practically a one-way street. Every pullback was minimal and attracted more buying.”
“Finance leaders at the weekend’s G-20 meeting [in Seoul] stated their commitment to limiting currency intervention,” notes Standard Bank here in London today, “but failed to announce any concrete actions/policies regarding currency devaluation.”
“[So] the Dollar has weakened significantly against most major currencies…and commodity prices are mirroring movements in the Dollar market.”
Crude oil pushed almost 1% higher in Asian trade today, while copper rose 2% in London.
Silver prices regained almost half of last week’s $1 loss per ounce, trading back above $23.75.
In the gold investment market, latest data shows the world’s largest gold ETF – New York’s SPDR Gold Trust – shrank by 3 tonnes (some 0.2%) last week as prices fell to $1328 per ounce (3.0% down).
Speculative investment demand also slipped in the US gold futures and options market, new data said late Friday. But in contrast, the total “open interest” swelled to a fresh record high in the week-to-last Tuesday, breaking through 909,000 contracts now open.
The net bullishness of speculative traders shrank, down more than 2% to 994 tonnes equivalent. On the other side of the trade, the “net short” position held by industry-side players shrank at its fastest pace since July.
Falling to an 11-week low of 35.1% as a percentage of all commercial-side contracts, the “net short” held by traders acting for miners, refineries and bullion banks dropped below its 5-year average for the first time since gold prices picked up from July’s 8% drop to 3-month lows.
Amongst private investors, meantime, today’s Wall Street Journal reports that growing interest is being met by financial advisors “try[ing] to tame investors’ appetite for gold.”
“I am not a gold bug, but I have a couple of clients that have just insisted,” says one Californian financial planner.
“Even as they objectively recognize the threat of a bubble, they just don’t seem to care.”
As a proportion of total investable wealth worldwide, according to a chart from Michael Cembalest of J.P.Morgan, physical gold currently accounts for some 4%.
Back in 1982, at the start of the long bull market in US equities, investable gold bars and coins enjoyed a weighting of more than 16%.
“[Emerging-market nations should] move toward more market-determined exchange rate systems…and refrain from competitive devaluation of currencies,” said the official communique from political and central-bank leaders from the world’s 20 largest economies who met in Seoul for the G20 summit on Saturday.
“Advanced economies, including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates,” the G20 added, pointedly not naming the United States.
But commenting on the widely-expected $500 billion of quantitative easing due from the US Federal Reserve after it meets next week, “An excessive, permanent increase in money is, in my view, an indirect manipulation of the [exchange] rate,” said Germany’s economy minister Rainer Bruederle in Seoul.
“This is not a Plaza-style statement that signals a broad agreement on the role currencies have to play in the global rebalancing,” agrees Thomas Stolper, chief currency strategist in London for Goldman Sachs.
“The language is not tight enough to impose anything on anybody.”
At a presentation last week in Zurich, “Many leading US economists, none more so than Paul Krugman, wish for nothing more ardently than a new bubble,” said Swiss wealth-manager and Thai-based investment author Marc Faber, quoted today by Tages Anzeiger.
“[But] one cannot solve the current economic problems with the same means which caused them.”
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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