Gold News

Gold climbs against all currencies; credit bubble also inflates

The spot price of gold climbed steadily in Asian trade today.

By the opening in London, spot gold had regained $654, up half-a-percent from the pull-back seen after the US session ended last night.

"The market is range-bound since people are waiting for the US non-farm payroll data to be announced later today," reckons Kishore Narne, head of research at Anand Rathi Commodities in Mumbai.

Range-bound or not, gold has now held above $650 since breaking that level at the start of Thursday's session in Asia.

Against the US Dollar, gold has now reclaimed its levels of one month ago. For Sterling investors it's trading 2.7% higher.

For Japanese and Euro buyers, however, gold remains lower from a month ago.

Up €2.50 from the overnight trough, gold at the opening in Frankfurt sat €7 down from this time last month at €497 per ounce.

At the Tocom, the most-active Japanese gold futures contract just closed higher for the second day running. But trading at the equivalent of nearly $680 per ounce, gold for delivery in Feb. '08 remains almost one-tenth off its tip of Feb. 26th – the day stocks, bonds and gold all fell out of bed together, starting in Shanghai.

(What caused the sudden attack of Chinfluenza? Read more here...)

"The momentum looks weak today," said one Japanese gold analyst to Reuters earlier. That's because a rally yesterday was a bit overdone."

Gold rose 4% at the Tocom on Thursday. But if the bounce has exhausted itself for now, support looks much stronger

"Long-term sentiment remains unchanged," says Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

"It's in a bullish mood. Resistance lies at $655 and $656, and the next one is $661."

The technical analysts at Standard Bank agree. "As crude oil prices slipped," they write today, "gold came under pressure and was sold off but managed to hold above $650."

"Prior to the release of the US employment data [due at 13:30 GMT] gold should continue to range between nearby support $645 and the $656/$661 resistance band."

"The longer term outlook still favours a move higher...The metal should target $670 and above."

All eyes meantime on the US payroll data due just before the opening bell in New York.

Economists surveyed by Bloomberg expect the weakest jobs growth in two years. But Wall Street has so far failed to back the consensus with cash.

US Treasury bond prices are headed lower for the week, driven down by the bounce in equities and corporate debt prices.

"US Treasuries at these levels are starting to look expensive," reckons Su-Lin Ong, senior economist at RBC Capital Markets in Sydney.

"They've discounted a lot of bad news."

No bad news for the bubble in asset-backed bonds, however.

Banco Santander has announced it wants to float €2 billion of mortgage-backed bonds. UK lender Kensington, which specializes in low-credit score borrowers, is going to raise £800 million by selling bonds subprime MBS.

And Paragon Group, the buy-to-let mortgage group, is floating £1.5 billion of its mortgages.

It's even got a new division, Paragon Mortgages No.14 Plc, specially set up to issue the debt and buy the mortgages.

But the subprime bubble has already burst in the US. Can Europe be far behind?

Click here to read more now...

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.

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