Gold News

Gold Cuts 2009 Gains to 30% as Deflation Hits Europe, China Hits New Year "Gold Rush"

The price of Gold dropped to a 3-session low at the start of London dealing on Wednesday, cutting its 2009 gains vs. the Dollar to 30% and losing 2.1% for the week so far.

World stock markets fell together with government bonds. The US Dollar ticked higher on the forex market.

Crude oil held near a 77% gain for the year above $79 per barrel.

Copper and zinc traded at the London Metal Exchange ticked higher from Tuesday's 15-month closing highs.

"With [the Tocom Gold Futures exchange in] Japan out today and the holidays upon us, trading has been thin overnight and the market remains vulnerable to sharp moves," says a note from precious metals dealer Mitsui.

"The whole key to the gold market is the Dollar," reckons Marty McNeill, a trader at R.F.Lafferty Inc. in New York.

"We could have some strength in the Dollar going into the New Year."

"Between Christmas and year-end, the volume in the market shrinks rather drastically," says Afshin Nabavi, head trader at MKS, the Swiss refinery group, also speaking to the Wall Street Journal.

"Because of scale-down buying by traders looking to sell onto jewelers, the market is probably not as low as it could be."

The China Daily reports a "rush" to Buy Gold as the Chinese New Year shopping season begins, with major department stores slashing jewelry prices by 3% to launch their promotions.

China National Gold, a major retailer, claims to have doubled its sales last weekend.

The Chinese year of the Tiger starts on Feb. 18th. Chinese households are now the largest single market for privately-bought gold, overtaking India decisively in 2009.

Meantime in Tokyo on Wednesday, the Nikkei stock index lost 0.8% on its last trading day of 2009, ending the year higher by one-half from March's quarter-century lows as shares in Japan Airlines plunged to a record low on fears the failing carrier is about go bankrupt.

Today the 16-nation Eurozone reported deflation in its money supply, with the broad M3 measure contracting by 0.2% last month from Nov. 2008.

The European Central Bank's target rate – set when the Euro was launched a decade ago – was for 4.5% money-supply growth year on year.

M3 growth in the 350-million citizen currency union hit a 30-year peak of 12.3% annually at the end of 2007.

German Bunds fell in price, however, driving yields up to new 2009 highs above 3.37%.

Ten-year UK gilt yields rose above 4.09% – a fresh 2009 high – as the Pound fell hard to new 11-week lows beneath $1.5860 on the currency market.

The Euro gave back Tuesday's brief rally above $1.4400, trading in a tight range around $1.4330 and holding the Gold Price in Euros above €760 an ounce.

British investors looking to Buy Gold today saw prices in the wholesale professional market dip to £688 an ounce – also more than 24% higher for 2009.

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Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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