Gold News

Gold slips further, but losses outpaced by falling stocks

Gold slipped back to $663 as the New York session drew to a close Thursday, matching further declines in Western stock prices.

"Traders have on eye on the stock market," said one New Jersey broker to Bloomberg earlier.

The FTSE in London has now dropped more than 5% since Tuesday. At one point on Thursday, the S&P in New York stood more than 1.5% lower for the day.

"People who've been riding gold's rally are going to bail," the broker went on. "They need to sell the most liquid asset to finance their stock holdings."

After pulling back at the US open, gold had ranged between $667 and $673 per ounce. The new fall – totaling 3.7% against the Dollar since Tuesday's 9-month high of $688 – has been matched in terms of both Sterling and Euros.

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.

Yet the long-term bull market rolls on regardless. 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.

Back to this week's action, and gold has yet to fall as far as the US or European stock markets. The bullish consensus of "safe haven" buying seen after the Chinese collapse hit on Tuesday, however, doesn't bode well for the metal short term..

Firstly, the idea of "safe haven" is simply wrong (click here to find out why...)

Secondly, "sentiment towards gold is still bullish," as one analyst put it to Reuters on Thursday. "What happened this week is a blip.

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

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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