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Gold opens higher in Europe for third day running

Wednesday, 2/07/2007 09:23

Gold rose in Wednesday's Asian trade, gaining $3 per ounce to $656.50 and opening the European session higher for the third day running.

"We continue to hold our view that [gold] markets have to break and hold the $666 level on a closing basis," said a Dubai analyst earlier to Reuters.

Gold needs "to inch towards the next target zone of $680-$685 levels," he added.

In the meantime, however, "we advise traders to hold their long positions in gold."

Jewelry demand from China failed to picked up yet again today. The Chinese New Year – based on the Lunar calendar and starting on Feb. 18 – is traditionally a time of strong gold purchases.

But "we can say there's not much liquidity," reports Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"It's easy for the [gold] market to go up and down. There's not much buying interest in physicals."

Japanese investors bought gold once more on Wednesday, however. The benchmark gold futures contract at the Tocom exchange in Tokyo – due for delivery in Dec. – rose ¥14 to ¥2,553 per gram.

That equates to $680 per ounce.

"I think the basic trend is bullish," says Akira Doi, a director at Daiichi Commodities. "But it's still too early to buy heavily from here...

"The market is very choppy now as we are seeing many short-term players looking for a chance to take profits on price gains."

Looking ahead, today's gold trading action may get a lift in Western markets from a fresh rally in crude oil. Forecasts of a cold snap in the north-eastern United States – plus heavy snow in Europe – are expected to send energy prices higher.

Often seen as a hedge against energy-price inflation, gold was moving in lock-step with oil until the sharp sell-off in all assets starting last spring.

Gold is now trading less than 10% off its top of May. Crude oil prices, however, are more than 25% down from their top of August.

Today's rally in gold prices so far has come against all major currencies. But versus the record-breaking run in first world stock markets, gold is currently lagging.

Yesterday saw a fresh 6-year high in UK equities. The Australian stock market is at record highs. The Dow in New York is fighting with new all-time highs above 12,700.

Can the bull run in mainstream financial assets – global real estate, bonds, fine art and equities – keep running forever? The traders and bankers of Wall Street, Frankfurt, Tokyo and the City of London certainly hope so.

To find out just what's at stake, click here and read more now...

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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.

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.

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