Gold News

Gold closes lower in London even as Dollar sinks

Spot gold prices closed London $4.50 lower on Monday, dropping 0.7% to $660.50 per ounce.

Against Sterling, Euros and the Japanese Yen gold fell further, thanks to a sharp decline in the US Dollar.

The greenback dropped to a three-month low against the British Pound on fresh expectations of a hike in Sterling interest rates.

At the Wall Street open, the Dollar was hit again on news that the Institute for Supply Management's manufacturing index fell to 50.9 in March from 52.3 a month earlier.

Any reading above 50 implies expansion, but the slowdown in US industry suggests that "business spending on capital equipment is off this year," says Chris Rupkey, a senior economist at Bank of Tokyo-Mitsubishi in New York.

"This report is in keeping with the more cautious attitude."

By 12:00 Eastern Time, gold priced in Sterling traded 0.9% down from the London opening at £333.75 per ounce – a two-week low.

"Oil is weaker, and the negative sentiment in the market is getting to gold," reckons Carlos Perez-Santalla, a gold trader and president of Hudson River Futures in New York.

"The market is nervous because favorable fundamentals like Iran have failed to take gold higher."

(What's so favorable about kidnapping and global instability? For the facts about gold's ghoulish reputation, click here now...)

Economic news in the Eurozone was no better for the Dollar today.

The Royal Bank of Scotland said its index of Eurozone manufacturing fell in March to the lowest reading since Feb. '06, led by a slowdown in Germany.

Don't expect any cuts in Euro interest rates soon, however. President of the European Central Bank (ECB), Jean-Claude Trichet said in a newspaper interview today that "firm and timely" action to combat inflation is still required.

"The outlook for price developments in the medium term remains characterized by upside risks," says Trichet.

"[Monetary policy] is on the accommodative side."

Easy money has certainly played its part in helping Irish house prices more than double in the last 5 years.

But house prices in the Republic of Ireland were unchanged in Feb., according to mortgage lender Irish Life & Permanent Plc.

At a cost of €311,078 (equivalent to nearly $416,000) homes in Eire "[are] clearly in a period of price realignment," reckons Niall O'Grady, head of marketing at Irish Life.

(Will this "realignment" cut as deep as the looming house-price "correction" in the United States? Read more about the US housing bubble – here...)

Meantime in the physical gold market, Barrick Gold – the world's No.1 miner – announced that it has suspended work at its Famatina gold project in Argentina.

The provincial government in La Rioja moved to ban open-pit mining using arsenic, mercury and other contaminating substances after pressure from local protesters, including threats to Barrick staff according to Mining Journal Online.

Environmental protests aren't the only block on fresh sources of gold mining supply, however.

Incredibly, the record budgets announced by many gold-mining companies for 2007 are more likely to CUT total exploration spending in the long run.

To read the full story now, click here...

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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