Gold News

Gold - highest ever monthly close, but Yen hobbles the bull

Gold did nothing of much in New York's morning session.

After pulling back at the US open, it ranged between $667 and $673 per ounce.

The 1% retreat from last night's top of $674 has been matched in both Euros and Sterling. But the continuing strength of the Yen – up 4% to ¥117 per Dollar since Friday – has pushed gold further back for Japanese investors.

Gold has now dropped more than ¥5,000 per ounce from Monday's top above ¥83,250. It's long-term bull market rolls on regardless, however.

Wednesday saw the spot gold market reach its highest monthly close ever, noted John Reade, precious metals analyst at UBS, earlier today.

Even in Jan. 1980, when gold hit its famous peak of $850, the metal only closed the month at $653. Last night in New York it ended Feb. 2007 at $669.50.

And with global stock markets still reeling from this week's shock drop in the Chinese market, gold is attracting new investors again.

"You're seeing people come in and buy the market at these prices,"said Daniel Vaught, a commodity analyst at A.G. Edwards in St. Louis, to Bloomberg earlier.

"The volatility in equities is going to renew safe-haven buying in gold and precious metals."

"[Gold] rebounded as people took another look and thought – safe haven," agrees David Thurtell, an analyst at BNP Paribas.

But the growing consensus that gold offers a "safe haven" is not only wrong (click here to find out why) – it also threatens to jinx the current rally.

"Sentiment towards gold is still bullish," said one analyst to Reuters today. "What happened this week is a blip.

"The gold price is going to head towards $700. That's what people want it to do."

But what "people want it to do" – as any experienced investor knows to their cost – is most often what an asset will refuse to deliver.

Short positions in the Yen, for instance, reached record levels just before the Japanese currency suddenly turned higher last week – creating a classic "short squeeze" which may have sucked money out of the Chinese market ahead of Tuesday's 9% drop.

What to make of this week's volatile action so far? For a cutting analysis of the flashing lights and clanging bells in the Shanghai casino, click here 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.

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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