Gold News

Gold Dips from $799, Breaks New 17-Month High for Euro Investors as Oil Surges Once More

Spot Gold Prices came within $1 of $800 per ounce overnight in Asia on Thursday, rising 2.7% from the week's lowest point so far before slipping back to $792 at the London opening.

"We are going to see $800 probably today or tomorrow," reckons Bruce Ikemizu, Standard Bank's chief commodities trader in Tokyo, speaking to Bloomberg at a gold conference in Seoul.

"Next year we are going to break the historical high of the 1980s at $850."

Today's early high came after the US Federal Reserve cut its key interest rate on Wednesday for the second time since the global "credit crunch" caused by the collapse in US real estate sales.

Cutting the Fed funds rate by 0.25%, the US central bank's decision extended the rally in Wall Street stocks, pushing the Dow more than 137 points higher to 13,930.

Crude oil prices also surged, racing from Wednesday's new all-time above $94 per barrel for December delivery to reach $96.24 in Singapore trading today.

"We are stepping into an unknown area," one broker told Dow Jones Newswires in Japan. "Nobody wants to sell for fear of a further rise."

The Nikkei stock-market index closed the day in Tokyo more than 0.8% higher. Japanese gold futures for delivery one year from now rose 2.3% to a new 24-year high, equal to $802 per ounce.

"High crude oil prices mean high Gold Prices," says Koji Suzuki, an analyst at Kazaka Commodity Co, "and in addition to this you have the weak Dollar which completes the scenario for a bull run."

The Fed's rate cut didn't only push the Gold Market higher versus the US Dollar, however. Indeed, the Dollar bounced from Wednesday's new record lows on the currencies markets, while bond investors sold US Treasuries lower in disappointment that the Fed didn't cut 0.50% off the cost of Dollars.

For British investors wanting to Buy Gold Today, the price rose 2.1% from Tuesday's low to come within £2 per ounce of Monday's new all-time record high at £386.50.

Gold Priced in Euros rose to a new 17-month high overnight, touching €552 per ounce for the first time since May 2006.

That sudden surge last spring ended with a 20% pullback in world Gold Prices. "What you have to be careful about [now] is how the hedge funds move," warns Suzuki. "If they decide to withdraw the market could just cave in."

But unlike last spring's sudden rally, the current bull run in Gold Bullion Investment has now held the average gold price above $700 per ounce for two months running.

Even the historic spike to $850 per ounce in Jan. 1980 didn't see the monthly average reach $700 per ounce – and compared against the world's five leading currencies, says the World Gold Council's data, gold has now held above the one-day high of May 2006 for three weeks running.

Meantime in the fast-growing economies of India, China, Turkey and the Middle East, demand for gold reached new records between July and Sept. according to a news release from AngloGold Ashanti today.

The world's third-largest gold producer, Anglogold said that these emerging economies saw private demand for gold total 317 metric tonnes – "half of global mine output for the quarter and 90% higher than the depressed level of a year ago."

That surge in Gold Buying by Indian, Chinese, Turkish and the Middle Eastern consumers came despite a 10% increase in the average Gold Price year-on-year.

The bid for physical gold, in other words, remains strong outside the developed world, even as Western investors force the price higher.

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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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