Gold News

Spot gold hits 11-month high, dips in Asia

Spot gold prices broke higher to hit $691.50 per ounce late in New York on Monday – an 11-month peak.

Physical bullion prices then pulled back in Asia early on Tuesday, before opening London just above yesterday's start at $688 per ounce.

"Fresh funds are flowing into gold," says Shuji Sugata at Mitsubishi Futures and Securities.

"Buying by Asian end-users is also spotted as market fundamentals are healthy."

Indian demand from jewelry buyers is set to rise strongly this month, as the wedding season coincides with a key festival in the southern states (click here to learn more...).

Overnight in Tokyo's futures market, gold for delivery in Feb. '08 hit a peak equal to $696 per ounce, its highest level since Feb. 27.

Comex gold for Dec. '07 hit $713.80 per ounce during the electronic session.

But with the gap between spot and futures prices already at historic highs, demand for physical bullion for immediate delivery seems to be attracting the bulk of new interest.

Turnover in London's physical bullion market rose to 20.6 million ounces in March, said the London Bullion Market Association yesterday – the highest volume of physical gold trading since the current uptrend began in Oct., nearly 29% higher than Feb.

Open interest in the New York gold futures market, however, fell during March according to the Commitment of Traders data.

The number of individual deals in London's physical gold market last month was in fact the highest since May last year, the LBMA added.

Back then gold spiked to a 26-year high above $720 per ounce. (For more on the dynamics of the gold market in 2006-07, click here and read on...)

"Continued buying interests after [last night's] New York close pushed gold marginally higher but lacked momentum," says today's note from Standard Bank in Australia.

"[But] with gold managing to post a fresh high for the year after briefly piercing $690 resistance and there remained strong physical demand, it is encouraging for the yellow metal for an orderly rally to target the psychological mark of $700 in the near-term.

"Immediate support around $680 and further below at $670 should prove to be buying opportunities should the market dip lower."

For British investors, now waking up to retail price inflation at a 16-year high of 4.8%, last night's top at $691.50 came within 0.7% of an 11-month high in Sterling.

Gold priced in Pounds hit £350 per ounce late in Feb. This morning, as the British government reported consumer-price inflation at 3.1% – outside the Bank of England's target zone for the first time since it gained operational independence in 1997 – gold opened London at £345.30.

(What can the Bank of England do to tame the inflation it's helped create? Click here for the gold market's view...)

The Euro-price of gold, meantime, continues to lag. Last night's top was still 1.7% away from Feb.'s high above €520 per ounce.

At the start of London trade today, gold priced in Euros traded at €508.

"We see some profit taking as the Dollar is up slightly," reckons Wallace Ng, chief precious metal trader at Fortis Bank in Hong Kong.

"This pullback in gold is very normal after the recent rally."

Meanwhile, the weekend's revelations about Britain's huge gold sales of 1999-2002 have been followed by news that gold holdings at the Qatar Central Bank rose more than fivefold during Jan. and Feb. this year.

Qatar said last year that it wanted to diversify its foreign exchange reserves away from the Dollar.

By the last day of Feb. 2007, it held some $65.97 million in gold, up from $12.17 million at the end of Dec. – suggesting that Qatar bought 2.49 tonnes during this two-month period according to ResourceInvestor.com.

And the fuss about Britain's gold sales of 7 years ago? Click here now for the full story...

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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