Gold News

Gold recovers Monday's losses even as Middle East tensions subside

Spot gold prices held steady in the Asian session on Tuesday, matching Monday's opening level in London at $665 per ounce.

"Many investors think [Monday's low] is the bottom," said Yukuji Sonoda, a Tokyo analyst for Daiichi Commodities, to Reuters earlier.

"Gold may increase to $700 by the end of June."

The Tocom's gold futures contract for Feb. '08 rose 0.7% per gram for Japanese investors, but dipped to equal $669.35 per ounce thanks to strength in the Dollar.

For British investors looking to buy gold, the metal recovered all but 50 pence of Monday's 1.3% sell-off, opening London at £336 per ounce.

Versus the Euro gold also regained Monday's opening level of €497 per ounce.

"Gold needs to break and close over $677 for further gains to $692.60," reckons Chintan Karnani, an analyst wity Insignia India in Delhi.

"On the lower side $665.70 is the initial support with $661.10 and $653.80 as the key support."

What drove gold's recovery from Monday's $8 drop to $657 per ounce? Most pundits and commentators still believe there's a link between oil prices and gold today.

Yet crude oil ticked lower as gold recovered late in New York yesterday – the mirror image of what had happened earlier in the day.

"There is no clear reason that precious metals should be falling," said one pundit amid Monday's sell-off.

"[With] the Dollar down, oil prices resolution to the UK/Iran...and only bullish news entering the market from a demand standpoint," he couldn't understand why gold didn't rise on bad news.

Now Tuesday has already brought news that diplomatic talks over Iran's seizure of 15 British service personnel are developing a "more positive feel".

Gold held steady on this news – defying once again the idea that gold always rises on bad news and always falls on peace. (Click here to discover what really drives gold prices higher instead...)

In the physical bullion market, meantime, trading is set to slow down as the week wears on according to Reuters.

Thursday will see Hong Kong close for the Ching Ming festival. London will be shut the following two business days for Easter.

"The market seems to be hanging around $655 to $668," says Ronald Leung, a gold dealer in Hong Kong.

"Below $660 there's some physical-interest buying. There's some seasonal demand at this level."

Demand from India – the world's largest physical bullion market – is now set to rise ahead of the spring wedding season.

The Akshaya Trithiai festival, celebrated across southern India later this month, is also becoming a time of strong jewelry and investment-gold buying.

(To read more about India's impact on the gold price, click here now...)

On the supply side, more bullish news for longer-term gold prices comes from Peru.

Previously the world's No.5 producer, it suffered a 25% drop in gold output in the year to Feb.

Zinc, silver and copper output rose. But total gold production was hit by falling output at Yanacocha, Peru's largest gold mine.

Majority-owned by Newmont Mining, Yanacocha has seen a drop in the grade of gold ore, plus a series of missed production deadlines.

Wall Street analysts now forecast on average that Newmont's revenues next year will slip from 2007. Just last week, the company countered by announcing record new exploration spending.

But whatever it does for Newmont's fortunes on the stock market, the company's extra spending is likely to cut total world gold production in the long run.

For the full story, click here 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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