Gold News

Gold opens the week higher - "should start to trend higher"

Gold rose in Asia on Monday, breaking $649.50 per ounce, before settling $2 lower – back where it closed last week – just before London opened for business.

Volumes appear light after the frantic action of last week. "We saw some buying from the Japanese," said a Bank of China gold dealer in Hong Kong earlier. "But I can say there's not much business...just a little bit of buying."

The dip in Asia was more pronounced in Dollar terms than against other currencies. British gold buyers began this week £2 better off from last Monday, above £330 per ounce.

"People believe the bull market is still intact," reckons Jonathan Barratt, managing director of Sydney-based Commodity Broking Services in Sydney. "We should start to trend higher...

Twenty-one out of 33 traders, investors and analysts surveyed around the world by Bloomberg last Friday advised buying gold. Four said sell. Eight were neutral.

"Crude oil certainly will be one support [for] gold," says Barratt, "and I think that is why you might see gold test back up through the $653 area and maybe even onwards and upwards...

"With oil trading where it is and staying above this $59 level, we should get some inflationary sort of feeling back to the market."

Gold last week shot higher to break $645 – seen as a key level on the Dollar charts by technical analysts – before racing above $660 per ounce, a 7-month high.

Friday's sharp sell-off knocked gold 1.4% lower, but it was only to be expected – especially with many metals funds losing money on copper and zinc right now. Last Friday also saw a slew of data on the US economy, taken as positive for the US Dollar by traders despite slower employment growth.

"The data available from the US economy for the last couple of weeks says the outlook remains bullish for the service sector on strong consumer demand and signals of a stabilising domestic real estate market," reckons Pradeep Unni, analyst at Vision Commodities Services DMCC in Dubai.

Today's non-manufacturing index, however – due at 15:00 GMT – is expected to come in lower than last month.

Currency traders will also be watching events this week at the G7 summit in Essen, Germany. Finance leaders from the world's top 7 industrial nations are meeting to discuss, amongst other things, the plummeting value of the Japanese Yen.

"Japan is unfairly manipulating [the Yen]," according to one US senator. But the greatest pressure on the Japanese currency right now comes from the international currency markets themselves.

Data released Friday shows a record "short" position in the Yen held by speculators betting via the US futures and options exchanges. Right on cue, the Japanese Yen has turned higher today. It's the only major world currency to have gained value versus gold since the start of last week.

What's been driving the Yen's historic collapse – and what might a rise in the Yen mean for Western investors holding gold? Click here to read more now...

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals