Gold News

Gold Up, Dollar Up as Gold Investment Demand Surges on "Perfect Storm"

Gold ticked higher in Asian trade on Monday, briefly touching $1190 an ounce before easing back in London as a rise in Asian stock markets failed to spur European bourses.

The Euro and Sterling both fell hard vs. the Dollar. US crude oil contracts slipped below $70 per barrel.

Silver Prices slipped back after rallying 3.7% from Friday's two-week low, while the rate of interest offered by government bonds fell yet again as prices rose.

Ten-year US Treasury yields fell below 3.20% per year for the first time in 12 months.

"Gold looks to have found a short-term bottom last Friday near $1166," reckons a note from Mitsui's Hong Kong office.

"Both physical and investment demand [are] picking up."

"We have been looking for a retracement in gold," agrees Standard Bank's commodities team here in London, "and now believe that it has largely run its course.

"We are once again witnessing some physical buying interest and re-stocking [in] Asia."

Looking at the Gold Futures and options market, "Gold is not overbought" says Standard of the latest data from US regulator the CFTC.

In the week-ending last Tuesday – and with gold already trading 2% off its record top of the week before – "large speculators" cut their betting on higher gold prices by 0.5%.

That was offset, however, by a rise in private investors using the futures and options market to bet on higher Gold Prices, leaving the non-industry "net long" position of bullish minus bearish contracts unchanged and equal to 1009 tonnes of metal.

"All of the turmoil and problems we've seen in Europe is just another reminder that there's a lot of value in gold as a safe haven," says Evan Smith, co-manager of $2 billion in funds at US Global Investors Inc. in California, speaking to Bloomberg.

"You could see gold go up another $1000."

"You've got a perfect storm with no apparent solution," says "low-profile billionaire" Thomas Kaplan in an interview with the Wall Street Journal published Saturday.

"If the world does well, Gold will be fine," says the manager of Tigris Financial Group. "If the world doesn't do well, gold will also do fine...but a lot of other things could collapse."

Today the new UK coalition government – slated to borrow some £200 billion this financial year ($288bn) – announced £6.2 billion ($8.9bn) of public-sector cuts, focusing on "low priority and back office functions."

The German government said it will cut public spending by €10bn next year (€12.3bn) to comply with the new "debt guillotine" added to Germany's constitution.

New debt issues from Eurozone banks and business fell to a 2010 low of barely $1 billion last week, the Financial Times reports, after Germany banned "naked short-selling" in the debt market.

On Saturday, the central bank in Spain assumed control of the CajaSur bank in Cordoba, holding some 0.6% of the banking sector's financial assets.

Swiss bank UBS's new "FX mega-trends" report forecasts a decade of "super volatility" ahead in the world's currency markets.

Estimates from Capital Economics' Toronto office says the M3 measure of US money supply – discontinued by Federal Reserve statisticians in 2006 – shrank by more than 5% over the last 12 months.

The US White House said president Obama "endorses" South Korean retaliation for last month's sinking of a naval ship by a North Korean torpedo, which killed 46 sailors.

"People are buying Krugerrand Gold Coins like crazy," says one German wholesaler, quoted by the newswires.

During the first three weeks of May, the US Mint sold more than four tonnes of one-ounce Eagle coins.

Comparing last week's 46-tonne growth in Gold ETF trust-fund holdings worldwide, investment demand now outstrips new mining output according to Bloomberg News.

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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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