Gold News

Gold holds steady ahead of Euro and Sterling interest rate votes

Spot gold prices held firm in Asian and early European trade on Tuesday, recording a morning Fix in London of $671.30 per ounce.

"We saw a mix of profit-taking and short-covering," one gold trader told Platts.

"But Asian trade was thin as most players are holding back on the lack of a firm and clear direction in the spot gold price."

Just after the London opening, investors trading gold bullion sold the metal lower – but it picked up again – on news of slightly stronger than expected service-sector growth in both the Eurozone and United Kingdom during May.

These numbers may weigh on tomorrow's Eurozone interest-rate decision – forecast to see a hike to 4.0% – as well as Thursday's vote on Sterling rates at the Bank of England.

Rising interest rates are typically bearish for gold prices – but only if the returns paid to cash savers consistently outstrip the rate of inflation.

Gold's rise since 2001 shows the failure of global interest rates to stay ahead of the cost of living. (Learn more here...)

In the currency markets, the Pound continued to push higher versus the Dollar early Tuesday, as forex traders gambled against City consensus on a possible base-rate hike to 5.75% this week.

That action knocked the Sterling price of gold below £337 per ounce shortly after the London opening.

For German and French investors looking to buy gold today, the gold price in Euros dipped below €497 per ounce.

"It's time for the gold market to take a breather," reckons Hiroyuki Kikukawa, associate director of research at Nihon Unicom in Tokyo.

Tocom gold futures for delivery in April '08 rose ¥8 per gram today to the equivalent of $680 per ounce, as the Nikkei stock index gained 0.45% to close above 18,000 for the first time since Feb.

"Investors look willing to buy gold on the dips," says Kikukawa, "as oil prices seem to be back to an uptrend."

Crude oil rose above $70 per barrel in London on Monday as a storm neared the Arabian Gulf – source of the bulk of the world's daily oil supply.

Further inflationary pressures continue meantime inside the gold industry itself.

South Africa's Chamber of Mines says it will meet today with industry leaders from both gold and coal sectors to "get a mandate" before negotiating with mineworkers' unions.

The National Union of Mineworkers is demanding a 15% pay rise. (Read more about the problems facing global gold mining supply here...)

Looking at the longer-term technical trends in the gold price, "spot gold reversed last week and rallied back to a resistance line," says Christopher B. Langguth for Mitsui.

"Gold will have to close above $693.20 before the buyers enthusiastically return. There should be stop-loss selling at $651.00.

"The price is about the midpoint of the range and could still go either way."

Away from the sound and fury of the short-term speculative markets, however, the key drivers of gold's six-year bull run remain intact, however.

Most especially, the "race to debase" amongst the world's major currencies continues to push gold prices higher the world over.

To get the full story now – plus specific analysis of the Euro, Sterling, Dollar and Yen – click here...

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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