THE PRICE OF GOLD dropped $10 per ounce to $845 early in
London on Thursday, while world stock markets continued to recover from
Tuesday's sharp sell-off.
Gold Bullion held flat for Eurozone buyers, however, as
the single currency ticked low against the Dollar.
Government bond prices rose. Crude oil retreated from a
one-week high of $45 per barrel.
"Gold has been well supported below $850 (the 200-day
moving average)," says a technical note from Mitsui, the international gold
dealers, today "but it has not been able to break the resistance at $865."
"The rebound in stock markets may be negative for gold,"
adds Peter Fertig at Dresdner Kleinwort in Hainburg, Germany speaking to
"The fear of bank nationalization had been supportive for
gold over the past few days."
Here in London today, shares in Royal Bank of Scotland –
now almost 70% state-owned – continued to rally from Tuesday's record low of
Trading down 98.6% from its stock-market top of two years
ago, RBS's financial strength has been downgraded from B to C-minus by
ratings-agency Moodys, which fears "significant future losses" at the UK's
Daily Telegraph columnist Ambrose Evans-Pritchard notes
that the UK government holds foreign currency reserves of less than $61billion,
but the foreign liabilities of UK banks – which it has effectively taken onto
its books – stand at $4.4 trillion, more than twice the country's annual
Thursday morning in London trade, the British Pound
bounced from its new record low vs. the Yen and 23-year low vs. the Dollar.
The Gold Price in Sterling held above £610 an ounce after
reaching new record highs Wednesday at £626.
"The key to where gold heads from here is in concerns
about the banking sector," says UBS analyst John Reade in a note to clients,
raising his one-month price target from $800 to $900 an ounce.
"Our client flows suggest that the developments in the
banking sector have truly spooked investors again," Reade explains, "with strong
demand for Gold Coins and small investment bars seen since the start of the
MKS Finance in Geneva also confirms strong demand for
higher-priced retail gold products, matching the surge in sales witnessed during
October and Nov. '08.
Looking ahead for Gold in 2009, RBS Capital in Toronto
advises "holding a significant position in the Gold ETF or Gold Bullion in lieu
Its latest Global Mining Investment Strategy & Outlook
Report – quoted by MineWeb – RBC notes that gold has outperformed other asset
classes during the majority of previous Fed rate-cutting cycles, especially when
matched by a fast-growing money supply and Negative Real Rates of Interest.
Over in Tokyo today, Japanese electronics giant Sony
warned of a near-$3 billion loss for the year-to-March '09.
The Bank of Japan meantime held its key interest rate at
0.1%, while forecasting a 1.8% contraction in GDP for full-year '08-09, followed
by a 2% contraction next year.
Across the Sea of Japan, Korea's economy shrank by 5.6% in
the last 3 months of 2008, the central bank said this morning, with exports
collapsing by one-eighth.
China today reported growth of 6.8%, sharply down from
end-2007's record 13% rate.
And meantime in Washington, President Obama's $825 billion
stimulus plan was said to be making swift progress through House committee
"Whatever the rights and wrongs of trying to fix
the blow-up in credit with fresh money and debt," as MoneyWeek magazine quotes
BullionVault, "new spending and debt is just what we'll get...like it or lump
"Investors looking to take cover might want to
lay in a stock of hard assets by Buying Gold or agricultural land – whatever
can't be printed or inflated to zero."