Whatever happened to gold as a "safe haven"?
"[The British sailors] are free," announced Iran's president Ahmadinejad at a press conference just as New York opened for business.
"They can go back to their families."
Gold promptly leapt $10 higher to a fresh one-month high above $673 per ounce. (Shouldn't gold fall on good news and rise on war? Click here for the real story...)
British investors looking to buy gold saw the metal shoot 1% higher after rising steadily in London to break £341 per ounce for the first time since March 1st.
Investors wanting to buy gold with Euros also saw the price of spot gold leap higher.
It broke €500 for the first time in a week, before rising to a 5-week high of its own above €504 per ounce.
Gold's sudden move came not in response to Ahmadinejad's announcement, but rather on much weaker than expected US economic data.
US factory orders for Feb. came in way below expectations, with Wall Street looking for 1.9% growth versus just 1.0% actual.
Outside manufacturing, the ISM purchasing managers index also disappointed Dollar bulls. Wall Street expected a reading of 54.3 for March.
The actual number was 52.4, suggesting a slowdown in growth amid the US housing crisis that may well force the Federal Reserve to cut Dollar interest rates.
Yet the resulting spike in Euros, Sterling and Yen versus the US Dollar was nothing compared to the move in gold. (Why does gold rise on falling Dollar rates? Click here to find out...)
The Pound gained only half-a-cent to $1.9766, while EUR/USD rose less than 0.3% to $1.3380.
In the oil market, meantime, "there [had been] at least $3 to $4 added to the price of oil as a result of the [British service staff] seizure," reckons Rick Mueller, an analyst with Energy Security Analysis in the Netherlands.
That "terror premium" evaporated on today's announcement from Tehran. Crude oil for May delivery sank by 1.3% by mid-afternoon in London.
"This won't suddenly lead to a recovery of Iraqi production," says Mueller, "nor OPEC increasing its output. But it does reduce a lot of concern about the flow of oil through the Strait of Hormuz.''
Oil last week spiked to a 6-month high of $68 per barrel on rumors that fighting had broken out between US and Iranian forces.
But as Philip Klapwijk, chairman of GFMS Ltd, pointed out at the London launch of his consultancy's Gold Survey 2007 today, gold's daily correlation with oil prices sank to precisely zero in the first 3 months of this year.
"The correlation with the GSCI and CRB commodity indices is also weak – and falling," he added.
The GFMS Survey, the most closely-watched of the three leading gold reports, highlights growing investor demand and falling mine supply amongst the key drivers of the gold price in 2006.
Looking ahead, said Klapwijk, it's "pretty certain" that spot gold's highest annual average price of $614 – recorded in 1980 – "is going to fall this year.
"I'd also be far from surprised if this year we saw the market moving above the 2006 high of $725."
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