Gold News

Spot gold retreats $4 to $684 on US retail sales data

Spot gold fell below Friday's closing level as the European session ended on Monday, slipping 0.5% to $684 per ounce.

The move came after US data showed stronger retail sales than forecast in March, helping the Dollar to recover slightly from a 15-year low versus Sterling and a fresh two-year low against the Euro.

Tuesday will bring Consumer Price inflation data from Washington, a closely-watched report for serious gold investors. (Click here for why...)

Looking ahead, demand for physical gold bullion is set to rise sharply, says Wolfgang Wrzesniok-Rossbach at Heraeus, the German refining group.

"Both our colleagues in Hong Kong as well as those in New York report that stocks in the jewelry industry seem to be pretty low at the moment leaving manufacturers with no option but to buy even at current high prices.

"The situation is however slightly different in Europe, we have seen here pretty strong scrap sales by banks as well as smaller refiners."

The end of this week also brings the Akshaya Thrithiya festival to southern India. Last spring it packed Bangalore’s 2,000 gold shops “choc-a-bloc”, says the Times of India. (Click here to learn more...)

In the futures market, Japan's benchmark contract for gold delivered in Feb. '08 rose 1.7% today at the Tocom, putting one ounce above $692 equivalent.

Comex gold futures for June '07 delivery rose to $692.40 an ounce during the electronic session overnight, their highest level since the end of Feb.

Bloomberg reports today that 24 out of 35 gold traders, investors and analysts surveyed at the end of last week advised buying the metal.

Three said to sell, while eight were neutral.

Longer-term, further price appreciation looks likely given the current squeeze on real interest rates.

Many leading bond investors now expect short-term US rates to fall below 10-year bond yields. Bill Gross, head of Pimco – the world's largest bond fund – expects the switch to come about thanks to lower US interest rates, despite rising US inflation.

The collapse of the subprime mortgage market, plus a slowdown in the broader economy, will spur the Federal Reserve to step back from the last three years of higher rates.

And history says that a smaller gap between interest rates and inflation tends to increase investment in gold (click here to learn more...)

In Frankfurt, the yield of two-year European government notes reached a four-year high after president of the Bundesbank, Axel Weber, said he wants to revise Germany's economic growth forecast upwards.

But higher interest rates to date have failed to cap growth in Eurozone's money supply, now rising at 10% year-on-year – its fastest rate since late 2001.

In the United Kingdom, the same story. The City expects news tomorrow that UK inflation held near its current 16-year highs in March.

So most economists surveyed by Bloomberg now forecast another interest-rate hike from the Bank of England.

"[But] the big danger is that inflation proves to be stickier than they are expecting," notes Ross Walker, economist at Royal Bank of Scotland.

He thinks CPI inflation rose to 2.9% last month.

The growth in UK credit lending has remained near a 15% year-on-year clip, despite three hikes in the cost of Sterling since last summer. House prices have also risen by 15% in the last 12 months.

Asking prices rose by £8,000 ($15,750) in the last four weeks alone according to RightMove, the property database. (For more on the UK housing bubble, click here...)

And yet the biggest financial story in the United Kingdom today – bigger even that today's unprecedented bubble in credit – is that chancellor of the exchequer Gordon Brown "ignored advice" before selling half the nation's gold at rock-bottom prices in 1999.

To read the story in full, 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.

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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