Gold News

Gold dips at PM Fix after gaining in Asia; "smart money" cuts bearish position

The spot gold market rose strongly in Asia and the first-half of European trade on Monday, gaining nearly $3 from Friday's US close to open the week in New York above $658.75 per ounce.

Physical gold bullion prices then dipped at the PM Fix in London, pulling back to $656 per ounce before bouncing against all major currencies.

Beginning a quiet week for global economic data, the morning's 0.5% move versus the Dollar was outstripped by gold priced in Yen as the Japanese currency dropped to ¥123.42 per Dollar, a fresh four-and-a-half year low.

The Yen's latest drop came after Bank of Japan governor Toshihiko Fukui said he wants to see greater traction in the domestic Japanese economy before raising interest rates.

Short-term borrowing costs in Japan have now been set at 0.5% or below for nearly 12 years.

The price of money remains low worldwide, in fact, despite the spike in US Treasury yields over the last month. Get the full story here now...

Spot gold priced in Euros also rose more than 0.5% this morning, touching €490 before dipping at the London open.

Gold priced in Pounds Sterling, however, hardly moved. For British investors wanting to buy gold bullion now it held around £332 per ounce as the Pound broke a 10-day high versus the Dollar above $1.9800.

In Asia today, "I don't see aggressive gold buying from the physical side," said Ronald Leung of Lee Cheong Gold Dealers in Hong Kong to Reuters earlier.

"My view is that gold is probably going to be trading in a fairly broad range in the near term," reckoned David Moore at Commonwealth Bank in Sydney. He put gold between $645 and $670 per ounce from here.

Standard Bank's daily report notes that "gold has shown some resilience in its recent trading in the $640s and would likely continue to find support in front of its 200-day moving average, starting from the $643 level.

"[But] upside potential in the gold market would likely be capped at $661 in the interim."

As for the much-vaunted $700 level – a 'key' barrier according to many pundits during gold's 14% rally in early spring this year – "the time window has shifted," says Peter Spina at GoldSeek.com.

"I would not feel comfortable betting against gold at these levels, although it does appear the rally will take a summer vacation."

Speculators in the Tokyo gold futures market disagreed on Monday, pushing the benchmark April '08 contract 1.4% higher to a 10-session high as the Nikkei stock index rose 0.9%.

But Comex gold futures contracts saw a drop of 30% in the total number of long bullish positions in the week ending June 12, the latest data available.

Open interest grew by 7% meantime, and large commercial traders – the "smart money" of refiners and other gold-industry players – cut their net short positions by more than a quarter from the week before.

This group now holds a smaller net short position in gold futures than it did back in January, report ResourceInvestor.com.

With the large commercial traders cutting their bearish opinion in the gold market right now, "the heavy pace of net-short reduction keeps this indicator on the bullish side," it adds.

If you'd like to track the 'smart money' in seeing higher gold prices ahead – and the resignation of gold-market analysts also suggests a sharp move ahead – then be sure to visit BullionVault today and claim a complimentary gram of bullion stored in Zurich, Switzerland...

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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