Gold News

Spot gold trades sideways in Europe as Dollar slips

Spot gold prices moved sideways through the first-half of European trade today, bouncing back above $650 per ounce from a dip to $647 just ahead of the US open.

"Importantly, gold has held the $650 area well," said Brandon Lloyd for Mitsui in Sydney earlier.

"If pressure persists on the US Dollar and the gold fundamentals continue to improve then we should see a re-test of the New Year highs."

By the start of European trade today, the Dollar had fallen 1% against the Euro since Thursday.

Now the Dollar has also slipped back against the Yen. The Japanese currency is strengthening once again versus all other actively-traded world currencies.

"Concern over the US subprime mortgage market is rekindling," said Yuji Saito, a senior currency dealer at Societe Generale in Tokyo to Bloomberg.

"Some investors are staying away from riskier assets, causing the unwinding of Yen carry trades." (Click here to read more about the carry-trade now...)

Saito reckons the Yen could rise further still if Japanese investment funds stay away from US Treasury bonds – the only "safe haven" investment to rise sharply during the recent stock market turmoil.

"The fundamentals of the economy are what you have to watch," adds an LA-based fund manager.

"We're going to have slower growth" he says, noting that short-term US interest rates are still higher than longer-dated yields.

The US economy has gone into recession six of the seven times since 1960 that this has happened before.

"The inverted yield curve should not be ignored," says Saumil Parikh, a fund manager at Pimco in California, the world's largest bond fund group.

"The fact that the yield curve is inverted gives us a signal that overnight rates are too high. That's what the yield curve is telling the Fed."

(But could a cut in US rates save the housing market? Click here to read on...)

Back in the gold market, and against Sterling the spot price of gold has moved in a tighter range so far today, opening London at £337 per ounce – the same price it opened Monday.

The Euro price of gold opened Tuesday's session at €494 per ounce, one Euro higher from yesterday's start.

"The market continues to gyrate with equal weighted bulls and bears trying to push the prices in either end's favour," says Pradeep Unni, an analyst at Vision Commodities Services in Dubai.

"It remains to be seen whether last week's steep rally was only a dead-cat bounce."

Gold futures traded in New York managed to hold above $650 per ounce as the US session closed last night.

But Tokyo's benchmark gold contract fell to price gold in Feb. '08 at the equivalent of $658 per ounce today.

"In terms of trading range over the remainder of this week," says David Moore, commodity strategist at the Commonwealth Bank of Australia, "I would expect that [spot gold] would probably be fairly broad.

"It's probably between around $645 an ounce on the bottom side, and maybe around $657 an ounce on the top side."

If that 2% range sounds like an opportunity for you to profit from active trading – and you'd like to start with a free gram of pure gold vaulted in Zurich on your behalf right now – simply click here and register with BullionVault today.

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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