Demand to Buy Gold Rising Amongst Central Banks, Asian Investors & US Consumers as Greek Euro-Exit Rumored Again

Prices to Buy Gold fell further Thursday lunchtime in London, dropping towards 3-week lows beneath $1710 per ounce as the Dollar rose following a raft of positive US data, which contrasted with fresh rumours of a Greek debt default or even Eurozone exit.

The Moody's rating agency today warned it may downgrade the status of 17
global and 114 Eurozone banks and financial services firms.

Wednesday's teleconference of European finance ministers concluded that Greece must submit itself to greater external oversight of taxes and spending if it is to receive further bail-out funds before the critical bond-repayment deadline in mid-March.

US crude oil prices meantime held near 5-week highs above $101 per barrel, while silver retreated 2.4% to its lowest level since 25th Jan. at $32.70 per ounce.

Falling earlier amid what brokers called "a broader sell-off in risk assets", the price to Buy Gold fell Thursday to £1090 per ounce for UK investors, but held above €42,300 per kilo for Euro buyers.

"Key support is in the $1706 area and resistance is at last week’s high around $1752," reckons the latest technical analysis from bullion bank Scotia Mocatta.

"Market sentiment towards [ Buying Gold ] seems broadly bullish, but some large stops lurking above $1730 are helping to keep a lid on things," says a London dealer.

Longer-term, "As a whole gold is adopting a more prominent role in the financial system," said the World Gold Council's Marcus Grubb to MineWeb this morning, launching the market-development organization's latest quarterly Gold Demand Trends report.

"Central banks are [now] a key part of this market. They bought 439 tonnes last year, which is a huge move on the demand side, but they also were leasing more gold into the market...largely [to raise cash for] adding liquidity to help the European banking system."

With "no end currently in sight to the woes of Greece and Italy," says the WGC's new report, "ongoing difficulties in the [Eurozone] will further stimulate Gold Investment demand."

China's private demand overtook world No.1 India in the fourth quarter of 2011, the WGC's report shows, holding equal with the last 3 months of 2010 by volume while India's demand fell 42% to the lowest level since the global recession of early 2009.

France saw positive net gold investment in 2011 for the third year in a row, after being a consistent "dishoarder" for almost two decades.

Producing some 80 tonnes of Gold Coins, Turkey was the world's top bullion minter once again, according to the WGC's data.

On the economic front Thursday, new US jobless claims fell to a near 4-year low last week, new figures showed, while housing starts were also better than analysts forecast.

Excluding fuel and food, factory-gate prices in the US rose 3.0% year-on-year in January, compared with Wall Street estimates of 2.6%.

In contrast to US gold investment demand, which slipped 29% by value at the end of 2011, US demand to Buy Gold jewelry rose 12% in the last quarter compared with Christmas 2010, says the WGC's report, reaching $2.3bn.

But "Household debt remains elevated by historical standards," says a new report from the Federal Reserve Bank of Richmond,  "and other determinants of consumer spending remain weak."

Chinese households meantime grew their demand to Buy Gold jewelry 27% by value year-on-year, spending three times as much as did US consumers.

China's physical Gold Investment demand rose 20% by value.

"It will probably take some time before investors in Hong Kong fully warm up to this [ Gold ETF ] product," UBS strategist Edel Tully said today, noting lackluster demand for the financial center's new exchange-traded gold trust, which was launched on Monday.

"One of the main appeals of gold in its key markets such as China and India is that it is a tangible, hard asset and easily accessible to retail consumers in physical form.

"The shift from Gold Coins and bars to an exchange-traded product may take some getting used to."

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