Gold News

Gold struggles at $650 as the "hot money" switches to stocks and currencies

Gold whipped violently on Monday, fighting with the $650 in New York's afternoon session after reaching $654 early in Europe.

"We have seen some profit-taking from the non-commercials," said David Gornall, head of bullion and foreign exchange at Natexis Commodity Markets.

"It looks like some of [these speculators] are happy to take profits around these numbers."

More serious investors may come to view today's retreat as a classic buying opportunity (click here for the "big picture" right now). But as Reuters notes, short-term traders cut their net long positions on the US futures market by 28% at last count.

"They don't really care for the idea that gold is going to be back at $700 quite soon," says Gornall.

"There is definitely some downward pressure at the moment."

Hereaus, the German refining company, also reports that industrial demand in its domestic market has been muted.

"Sales were limited [last week] despite the fact that the metal’s value temporarily lost on a euro basis 8 percent," it reported this morning.

Speculative activity remains focused on the equity and currency markets, meantime. The Nikkei in Tokyo ended today 0.75% higher. Japanese 4th quarter data said GDP growth hit 5.5% at the end of last year.

Yet the Japanese Yen has continued to retreat from its sudden bounce of a fortnight ago.

The British Pound used to be a favored destination for so-called "Yen carry-trade" cash, thanks to its relatively high interest rates. But Sterling has dropped sharply today despite news that Producer Price Inflation remained at 2.2% year-on-year in Feb.

Dropping more than a cent against both the Euro and the Dollar, this fresh weakness in the British currency has helped to keep the Sterling price of gold around £337, even as the Euro price has given back more than 1% from this morning's top to €493 per ounce.

The drop in Sterling also defies today's news that UK house prices are now rising at double-digits once again, up 10.9% in the year to Jan.

(Could the Pound Sterling finally be about to suffer for the excesses built up in the UK economy? Click here to read more...)

On the demand and supply front, meantime, a new report from Melbourne today said that Australia's gold mining output fell 5% last year to levels last seen in 1993. (Read more about the problems facing gold miners the world over here...)

And in Mumbai, Benchmark Asset Management Company today wrapped up its first allotment of shares in Gold BeES – India's first ever exchange traded gold fund (ETF).

The base price per gram equaled $21.39 – giving an ounce price of $665 even before the entry load of 1.5%.

Why pay so much above spot – and why pay such huge fees on top?

Click here for the truth about buying gold on trust alone...

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.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals