Breaks 10-Month Down-Trend,
Hits New Euro & GBP Highs,
on Frantic "Safe-Haven" Demand
London Gold Market
THE SPOT PRICE OF PHYSICAL GOLD remained volatile
in London on Monday morning, reaching new all-time highs for UK and Euro
investors but retreating from new 15-week highs against the US Dollar.
Trading at $900 per ounce, Spot Gold began the
week almost 9% above last Monday's New York opening after breaking out of its
10-month downtrend vs. the US Dollar late on Friday.
Asian stock markets slipped meantime, while
European equities recovered a third of last week's 4% drop.
Crude oil held flat below $47 per barrel. German
Bund and US Treasury bonds ticked lower, pushing their 10-year yields up to
3.28% and 2.66% respectively.
"US credit spreads narrowed on Friday," notes
Walter de Wet for Standard Bank in Johannesburg, but "although this indicates
diminished investor risk aversion, equity index futures are pricing in more
downside in the US today.
"Investors could remain cautious, therefore, which
could anchor precious metals especially gold."
"Gold is the obvious shelter for safe-haven
investors right now," agrees today's Gold Market note from Mitsui, the
London-based precious metals dealer, "and the racing drive of buying interest
has pushed the Gold Price to record levels in a host of non-dollar denominated
Today the Pound Sterling failed to hold a 3¢ jump
to $1.3850, supporting the Gold Price in Sterling near a new record high hit
overnight above £662 per ounce.
The European single currency meantime ticked below
$1.30, pushing the Gold Price in Euros up to a new record high above 700 an
In terms of the old German Deutsche Mark, gold
this morning hit its third-highest Gold Fix in history, equivalent to DM
44,461 per kilo.
That was just 4% shy of the levels hit either side
of the 20-21st January weekend in 1980 the 28-year peak for US investors
broken when Bear Stearns collapsed in March last year.
"Of course," Mitsui continues, "steep moves to the
upside can lay the foundation for an equal move to the downside. There is a
distinct possibility [that] the return of scrap selling will add pressure."
But looking ahead for Gold in 2009, "So many
bullish factors have aligned to propel gold to higher territories," Mitsui
adds, "the action of investors will determine golds fate over the coming
In particular, the fact that last week saw gold
"continue its appreciation drive in the face of persistent Dollar strength is
a unique event, and only serves to strengthen golds bullish argument."
This morning in Tokyo where the Nikkei 225 index
slipped 0.8% Tocom Gold Futures for settlement in Dec. 2009 rose 5.5% vs.
the Yen, nearing a 3-month high at ¥2,600 per gram.
New data released after Friday's close also showed
the outstanding volume of US Gold Futures & options growing for the sixth week
running, swelling by more than 22% from the two-and-a-half-year low hit in
Bearish bets held by the "smart money" of gold
refiners, wholesalers and bullion banks traders in the business of selling
gold, who are always more short than long as a result have risen by almost
one-third since then.
Bullish betting by hedge funds and other "large
speculators", in contrast, has grown by 39%.
The latest survey of professional gold traders and
analysts from Bloomberg News is "the most bullish ever", says the newswire
today, with 28 out of 31 respondents "predicting gains as investors seek a
haven from economic turmoil."
Bloomberg's weekly survey has proven accurate some
59% of the time since it was launched in April 2004.
Longer-term for Gold in 2009, the London Bullion
Market Association's latest Gold Forecast shows that "Contributors expect gold
to be the only [precious] metal to finish with a higher 2009 average of $881
some $30 above the price of early January 2009."
Last year's LBMA Forecast averaged $865 an ounce,
less than 1% shy of the final figure.
Winner of the 2008 Forecast with an exact call of
$872 per ounce, Frederic Panizzutti of MKS Finance in Geneva now sees the Gold
Price averaging $901 in 2009, ranging from $720 up to $1,180 an ounce.
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 where you can Buy Gold Today vaulted in Zurich on $3 spreads and
0.8% dealing fees.
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