Gold News

Gold - bargain hunters fail to stem Asian dip

Gold ticked slowly lower in Asia today, drifting $2 per ounce to $625.50 as London opened for business.

"Actual gold buying is a bit active," reckons Yukuji Sonoda, precious metals analyst at Daiichi Commodities in Tokyo. "The price is cheap at the moment...

"Chinese New Year demand is also expected, but the actual demand will not have an immediate effect on spot gold."

Bargain hunting by jewellers and industrial gold users failed to affect the gold price much so far today. Gold dipped against all major currencies except the Yen, as the Japanese currency lost value yet again despite expectations the Bank of Japan will raise interest rates on Thursday.

Out of 35 traders and analysts interviewed yesterday by Reuters, 29 say the BoJ will hike to all of 0.5%. And so the "carry trade" goes on...with hedge funds and investment banks borrowing Yen to sell in exchange for better-paying assets like US government debt (now paying 4.78%), high-risk emerging market bonds (yielding less than 2% more) or a simple Sterling cash deposit (risk-free at 5.25%).

The Thai Baht also got hit overnight in Asian trade, after the Bangkok government said it will maintain currency controls on foreign investment.

"The restrictions continue to undermine the baht," said a senior analyst at State Street Bank & Trust. "It's probably the case that the central bank wants the baht to weaken a bit more...There could even be more measures aimed at curbing baht strength."

Why would a government want its currency to fall? The Baht was last year's strongest Asian currency, rising 14% in 2006. It's since dropped nearly 3% thanks to the Bangkok government meddling with free flows of capital. (Read the full story here...)

But the big news from the global currency markets is that the Euro has usurped the US Dollar as the world's No.1 currency in international bond markets for the second year running.

According to the International Capital Market Association, outstanding debt issued in the Euro was equal to $4,836bn at the end of last month, versus $3,892bn in Dollar-denominated bonds.

The Euro has also overtaken the US Dollar as the world's most heavily issued currency, too. Could this spell the end of the Dollar as the world's reserve currency? Click here to read on...

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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