Gold steady as scrap sales rise but world money supply rises faster
Gold priced in Dollars traded in a tight range in Europe on Tuesday as the Japanese Yen was sold lower once again.
By 10:30 GMT, the price of buying gold in Dollars was $654.80 – right around its closing level in New York last night.
The US Dollar, meantime, had risen against the Yen, hitting ¥117.80 from Monday's US close of ¥116.10.
That move helped gold futures traded in Tokyo – due for delivery in Feb. '08 – touch a two-week high of ¥2,514 per gram overnight, equivalent to more than $663 per ounce.
Investors wanting to buy gold in Sterling, on the other hand, found it 1% cheaper this morning below £334 – a level last crossed on Friday.
Priced in Euros, buying gold cost €493, just shy of a one-week high hit earlier today at €493.60.
"The daily relative strength index (RSI) is quite oversold," says Colin Abram, analyzing his charts for MiningMX.com.
"The strategy now should be one of buying on pullbacks. Closest support is at $640...The upside targets are currently $690-$710, as well as a more medium-term target of $750."
Meantime in the Asian market, the current price level continues to attract new scrap supplies onto the market.
"I saw selling from Indonesia and I think we will see more scrap coming in," said a dealer in Singapore to Reuters earlier.
Gold investors shouldn't be surprised to hear of scrap coming onto the market.
In Feb., gold delivered its third highest monthly average on record, beaten only by Jan. and Sept. 1980 – the year that gold touched its all-time top of $850 per ounce.
But scrap gold accounts for just 20-25% of total supply each year.
And even with gold now trading at levels seen near its all-time peak, the global mining industry still can't increase the major component of supply – new mining output.
Annual production in South Africa, the world's No.1 supplier, has halved in the last decade. North America output is also slowing – as is output in Australia (click here for the latest news...)
In short, longer-term supply shortages look likely to meet rising investment demand.
"We might see the gold price trading in an upward bias" in the short-term, reckons David Moore of Commonwealth Bank in Sydney, "possibly looking to go up to, let's say, $660 an ounce.
"What's happening is the gold market is consolidating after a period of quite significant volatility, when the gold price has been knocked around by movements in equity markets and movements in exchange rates."
(Why didn't gold provide a "safe haven" during the recent stock and bond market crashes? Click here for the facts...)
Falling gold mining supply comes in sharp contrast to the surging supply of government-issued money today.
The Bank of England this morning reported that broad money growth in the United Kingdom "fell" to 12.8% annualized in Feb., down from 12.9% the previous month.
But this dip will do nothing to restore long-term confidence in the Pound Sterling as a store of value.
Private sector lending rose last month at its fastest pace in any February since 1990.
The supply of credit in Britain rose by 15.3% from a year earlier.
How much longer can this devaluation of official monetary units go on? For the very latest analysis of today's global bubble in credit – and what it means for your savings – click here now...