Gold Nears Weekend 5% Up vs. Dollar, 3% Up vs. Euros; "Uptrend Intact, Not Yet Over-Extended"
Gold slipped back with equities, government bonds and crude oil in London dealing on Friday, but headed towards the long US Columbus Day weekend almost 5% higher for the week.
The US Dollar fell from an overnight rally, helping Gold priced in Euros slip 1% from Thursday's new 7-month high of €717 an ounce.
For Eurozone investors, however, gold remained more than 3% higher from this time last week.
"I think Gold's uptrend remains intact," said one Tokyo analyst to Reuters this morning.
"The move does not look over extended yet," says Scotia Mocatta's technical analysis team in their Metals Matters report.
"Fabrication demand is very poor and these higher prices will not help," the bullion bank adds, noting that India's gold imports fell 60% year-to-date vs. 2008.
"But there must be considerable pent up [jewelry] demand and investor interest is strong...
"It all looks bullish, but be wary in case equities start to correct. Precious metals are likely to suffer too – initially."
Asian stock markets today closed the week strongly higher, adding almost 3% to Tokyo's Nikkei index and leaping 5% in Shanghai as China returned from its National Day celebrations.
UK and Eurozone shares slipped, however, even as the Euro and British Pound – typically marking better risk-appetite worldwide – pushed higher.
"If we see the Dollar strengthen," says Suki Cooper at Barclays Capital, "there could be a potential for a near-term correction [in Gold]."
"A Dollar rally, even if only temporary, could provide a reason for gold longs to take profits," agrees HSBC's James Steel.
Longer-term, and "Beginning in 1999, gold started up in a primary bull market," writes Richard Russell, author for five decades of the widely-respected Dow Theory Letter.
"In my personal opinion, this is fated to be one of the greatest bull markets in history. It will be a bull market built on not one, but two powerful human emotions – both greed and fear.
"The speculative third phase lies ahead."
New data released on Friday meantime showed factory-gate prices rising sharply in the UK, up by 0.5% last month from August, and 0.4% above Sept. last year.
Raw material prices worldwide have leapt from the record sell-off of late 2008, with both crude oil and copper prices doubling from their Dec. lows.
Nickel has nearly trebled. Cocoa dealt in London today reached a two-decade high on what Bloomberg calls "speculation that a supply shortfall will extend into a fourth year."
"At some point, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road," said US Federal Reserve chairman Ben Bernanke in a speech on Thursday.
No timing or specific 'exit strategy' from the Fed's $2 trillion monetary stimulus was proposed, however.
The private market for residential mortgage-backed bonds – a key source of home-loan finance – meantime remains "frozen", said George Miller, head of the American Securitization Forum, to a Senate committee yesterday, with new issuance running at just one-fifth the 2006 level.
Here in the UK, the government's HomeBuy Direct program was called "a catastrophe waiting to happen" by Robin Hardy, analyst at stockbrokers KBC Peel Hunt, for granting up to 10,000 home-buyers 100% 'no money down' mortgage in a £300 million scheme.
"If the only way a certain bit of the market can work is to lend deposits, those people can't afford a house. It's being done for the industry and not for the first-time buyers."
Over in China, "It's far too early to talk about an exit strategy," said Beijing's chief banking regulator Liu Mingkang, at a Hong Kong conference today.
Despite growing at an 8% annual clip, he warned, the economy "may face a bumpy road ahead."
Albert Cheng, head of market-group the World Gold Council's Far East offices, told Reuters today that private Gold Investment in China jumped to a record high of 70 tonnes in 2008.
Analysis from BullionVault shows China's Households Doubling Their Allocation to Gold, both as jewelry and bars, in the last 10 years.
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