Gold News

Buying Gold "Well Advised" as Stocks Plunge with Oil, Switzerland Spends $870m a Day on FX Intervention

Gold bounced from a new two-week low in London today, nearing the weekend 4.3% below last Friday's close as world stock markets slumped for the fourth time in seven sessions.

So-called "safe haven" government bond buying continued to push prices higher, knocking the yield offered to new buyers of US, German and UK debt to new multi-month lows.

US crude oil contracts slipped back below $70 per barrel, more than 20% below May's 18-month peak.

"Investors are looking for a strong reserve currency," writes Filippo Finocchi at bullion dealers Italpreziosi in Arezzo, Italy.

"Purchasing protection in the form of Gold appears well advised," says economist Charlie Fell, writing in The Irish Times.

"The 'bailout age' could well give way to either malign inflation or destructive deflation. A return to price stability cannot be assured."

On the data front today, the Swiss National Bank reporting buying almost CHF1 billion ($870m) of foreign currencies per day in April, selling Francs to try and depress it in the open market.

"The Swiss are in danger of selling out their remaining economic and monetary independence," says Sean Corrigan at Diapason Commodities in Lausanne, "to buffer their admittedly important exporters from the malfeasance of their neighbours' governments."

Following Wednesday's rumored €9.5bn purchase by the SNB, dealing-room chit-chat continued to whisper about "covert intervention" by the European Central Bank today. But "there isn't any evidence so far," says Beat Siegenthaler, strategist at UBS.

US Treasury secretary Tim Geithner will visit the UK and Germany next week "to discuss the measures being taken to restore global confidence and financial stability."

The UK meantime reported zero money-supply growth for last month, but the largest-ever April deficit on government spending at £10 billion.

New figures yesterday showed US unemployment claims rising sharply.

Tokyo's Nikkei stock index today finished the week 6.5% lower, falling through 10,000 for the first time since Feb.

"Gold's correlation with the Dollar has turned highly positive [and] with stocks deeply negative," notes Phil Smith at Reuters Technical in Beijing. "This raises a question mark over the sustainability of the [recent] upturn."

"Gold Price action remains under pressure," agrees a technical note from Barclays Capital, "falling to two-month trendline support at $1175.

"With daily momentum rolling bearish, the downside bias remains."

In the retail investment market, in contrast, heavy European buying continued as prices slipped on Friday.

By lunchtime in Frankfurt, "Not available" showed against 216 of the 236 gold or Silver Investment products listed by one major German retail dealer.

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Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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