Gold News

Gold up $4 in Asia as "shorts" get caught

Gold bounced nearly $4 higher in Asia today after hitting a new one-week low of $621.50 per ounce late in New York. It's since begun selling off again as Europe opened for business.

Gold futures for Dec.07 dropped 0.2% at the Tocom in Japan. The Feb.07 contract also dropped 0.2% at the Nymex in New York on Thursday night.

"You can call [the Asian bounce] technical buying," said a Singapore gold dealer to Reuters, "and the market is now in a neutral position.

"But the fact that oil is sliding and other commodities are coming off doesn't help sentiment."

Crude oil, alongside plunging copper prices, has now sunk by more than 8% in two sessions – its sharpest drop since Dec.04 – as growing US stockpiles meet milder US weather. WTI Nymex is currently trading at $55 per barrel, more than 12% down from this time last year.

Meantime, the US Dollar has rebounded to $1.301 vs. the Euro and sent the Pound nearly 4 cents lower to $1.940 ahead of the non-farm payroll data due at 13:30 GMT today. Wall Street economists polled by Reuters expect a rise in US jobs of 103,000 in Dec.

"We are looking for a slight rebound in gold," says the director of Lee Cheong Gold Dealers in Hong Kong. "$620 seems to be support for the time being. We can say there's some short covering from the Asian region."

Gold shorts might find themselves caught out in Europe too, according to a report yesterday. You wouldn't know it from the price, but banks in Germany, Austria and Switzerland are seeing "quite good business" in gold bar sales said Wolfgang Wrzesniok-Rossbach, head of marketing and sales for Heraeus Metallhandels Gmbh in Hanau, Germany.

Owner of five precious-metal refineries, the company believes that European banks are "letting the material flow out until their stocks reach a certain level and then basically they're going to have to fill up again."
Jewelry demand in Asia should also be on the increase right now according to the newswires today.

"The Lunar New Year [in February] is the most important festival in Northern Asia and part of Southeast Asia," says a trader at Agricultural Bank of China, "so we will continue to see some buying from jewelers."

Meantime, dealers report light buying from Indonesia. "They sold their holdings when gold reached around $640 but began to buy on dips at below $630," says a physical dealer in Singapore.

"Thai consumers are keeping a low profile at the moment," he adds, referring to the New Year bombings in Bangkok and rumours of troop movements near the Thai capital, "but I would expect them to return to the market because of the uncertainties. I think they should come back."

Meantime, news of a European central bank buying gold – instead of selling like central banks are supposed to – rumbles on. Dennis Gartman, editor of the Gartman Letter, now blames the "unseemly" drop in the gold price since Wednesday on this very story!

"[It] should be construed bullishly," he says. "For a while it was." But traders then got to thinking that maybe the mystery was the Banca d'Italia...and maybe it was annoyed at the strength of the Euro hurting Italian exports...and so maybe the 2 tonnes it bought is bearish for gold, because it's good for the Dollar, because it's bearish for Euros.

Confused? You will be if you spend too long trying to figure out how the gold market works. But for a short review of this week's big gold news instead, click here now and read on...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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