Gold News

Spot gold pulls back as market watches for US inflation data

The spot price of gold dipped at the London opening on Friday, slipping $2 to $677 per ounce, but holding above yesterday's low at $673.60.

"The underlying factors are bullish," reckons Darren Heathcote at Investec Bank in Sydney.

"Oil prices are up and we have had a weaker US Dollar."

That weakness in the Dollar, however, only served to make gold cheaper for non-US investors.

Gold slipped 0.6% against Sterling from its overnight high, trading at £341 per ounce by 10:50am in London.

Versus the Euro, gold came within 70 cents of €500 per ounce – the key level it's dipped below only once in the last 7 sessions.

But with the Indian wedding season now drawing near – and the Akshaya Thrithiya festival next week – "there is an element of physical buying on the dips which is underpinning the market," reckons Heathcote.

On the data front, initial jobless claims in the US rose faster than expected last week according to numbers released yesterday.

US import and export prices both rose in March too, said the Bureau of Labor Statistics.

Today will see the latest Producer Price data released in Washington. Wall Street consensus forecasts a 0.7% rise, following a shock 1.3% rise in Feb.

Anything greater could push fresh investment Dollars into gold.

"The fear is that we're going to see continued pressure on prices," says Tim Rogers, chief economist at

"The Fed's job is to lower inflation, and that simply hasn't happened yet."

(Click here to learn why the Fed's failure is bullish for gold...)

Elsewhere, pundits and newswires alike all point to yesterday's 3% rise in crude oil prices as supportive for gold.

WTI for May delivery broke $64 per barrel for the first time this week on news from the International Energy Agency that global stockpiles recorded their biggest first-quarter decline in more than a decade this year.

But gold investors would do well to note that the daily price correlation between crude oil and gold sank to precisely zero in the last 3 months.

And you really shouldn't believe everything you read on the newswires anyway – as the Gold Fields "takeover" scam proved earlier this week. (Click here for the full story...)

In the gold futures market, Tokyo contracts for delivery in Feb. '08 closed at the Tocom 0.9% higher for the week at the equivalent of $683 per ounce.

And in electronic trading in Asian, "the June delivery Comex contract has already breached the $680 target and will probably test $688 soon," says Rajini Panicker, head of commodities research at Man Financial in India.

"Oil and the Dollar will continue to support gold," he believes.

But it's the dynamics of supply-and-demand internal to the gold market that really look set to support the current bull market long-term.

South African gold production fell 8.8% year-on-year in Feb., said the statistical agency in Jo'berg yesterday.

Overall minerals production, however, was 4.4% higher year on year.

That suggests that the world's largest gold-producer is facing problems specific to gold production – problems faced by the global gold mining industry, in fact.

To learn more, click here now and read on...

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.

Follow Us

Facebook Youtube Twitter LinkedIn



Market Fundamentals