Gold Slips into 2009 on Thin Trade, Offers "Something Solid" to Investors as Central Banks Try to Inflate Away Recession
Spot Gold prices slipped into the first, quiet session of 2009 trading on Friday, recording a London AM Gold Fix of $869.75 an ounce – some 3.4% above the start of 2008 for Dollar investors.
The Gold Price in Sterling held just shy of £600 an ounce as 2009 began, higher by more than 40% from this time last year.
French, German and Italian buyers saw the AM Fix set at €623.65 – up almost 9% from the first session of 2008.
"While Gold looks strong at the moment, it's important to keep in mind that the world's largest consumer of gold – India – has not been buying," notes the precious metals team at Mitsui in London today.
The Bombay Bullion Association said Thursday that total Indian gold imports sank by 81% last month from the same period in 2007.
"For Gold to continue higher, therefore, a significant amount of weight will be placed on the investors," says Mitsui. "With exchange positions down over 50% from last February's levels, one would think that there is room for some investors to add gold to their portfolios."
Latest data from the US Gold Futures market showed hedge funds & other "large speculators" growing their bullish bets to a 3-month record in the week to Dec. 22nd. As a proportion of all speculative trades, the bullish ratio rose to a 10-month high of 91%.
But overall, the outstanding number of gold futures and options contracts remained low – down by more than 45% from the record peak of Jan. 2008.
Meantime on the currency market today, light volume forced a jump in volatility, with the Euro gaining and then dumping 4¢ to the Dollar. The Japanese Yen fell to a 3-week low of ¥91.40 per Dollar.
Tokyo remained closed for business, and won't re-open until Tuesday. European stock markets added 2% on average in thin trade, while government bond prices fell.
After the US reported a new record low for Consumer Confidence on Wednesday, new data released in London today showed UK house prices falling 16% for 2008 as a whole on average.
The number of new mortgage approvals fell to 27,000 in Dec. – a new three-decade low. Money supply growth continued to leap, however, up more than 16.5% year-on-year as the Bank of England pumped money into the banking system.
Europe's Purchasing Managers Index (PMI) for the manufacturing sector showed a new record low today, down to 33.9 for Dec. from the previous month's reading of 35.6.
Looking ahead to Gold in 2009, "The US Federal Reserve has publicly stated they're going to print as many dollars as necessary to prevent the system from melting down," says Hans Goetti, chief investment officer in Singapore for LGT Bank of Lichtenstein, speaking to Bloomberg.
"For me the conclusion is clear: if you want to keep your purchasing power you have to be in something solid like gold."