Gold News

Gold pulls back but closes European session higher

Gold leapt higher in Europe's morning session on Tuesday, breaking back above $657 per ounce only to pull back on weak trade in the US.

Even so, "the market has been able to consolidate around $650 which should be a solid base," reckons Frederic Panizzutti, analyst with MKS Finance in Germany.

"The general positive feeling for commodities over the last couple of days and the ongoing dollar weakness are very supportive for gold...

"We will not be surprised if further inflow of fresh investment into gold happens over the coming few days. The longer we can hold the $650, the stronger the base will be."

Today's action was repeated in all major currencies. British investors gained 1% to £334 before gold dropped back to £332. Against the Euro, gold rose 1.2% to break €507.50 and record a new 7-month high. It then retreated to €504, higher for the day but sharply off its highs.

"People will hold off selling gold when they see copper and other commodity prices higher,'' says a Swiss gold trader.

"We are seeing good demand out of Asia," he adds, referring to the upcoming Chinese New Year festival.

Copper today halted its 15% plunge since Jan.1. Crude oil futures have also climbed.
But gold's current bull run – which started in 2001 for Dollar investors – has come thanks to the metal's own particular appeal.

"The driving force behind the bull run for gold has been the increase in activity from the investment community," said Natexis in a report yesterday. It forecasts an average gold price of $670 per ounce in 2007 – up from $603 last year – rising to $710 in 2008.

For more detailed analysis – plus the outlook for gold mining supply and central bank sales in 2007 – click here and read on...

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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