Gold News

Spot gold trades flat as Europe re-opens; Barrick closes its hedge book

Spot gold bullion prices traded flat on Wednesday, rattling between $673 and $675 in thin Asian dealing ahead of Europe re-opening after the May Day holiday.

"We are waiting on new data, a new direction from the US to see where the Dollar is going," reckons Charles Dowsett at ABN Amro in Sydney.

"We are range bound at the moment with support at $670."

The price of gold in Pounds Sterling was also unchanged, just shy of £338.

Against the Euro gold prices began Wednesday in Europe at €496 per ounce.

Japan's futures market, the Tocom, was open today, but investors wanting to buy gold for April '08 watched it tick lower ahead of tomorrow and Friday's national holiday.

Tokyo's benchmark gold contract dropped 0.5% to the equivalent of $685 per ounce.

"We want to see how the Dollar reacts after the release of [Friday's US] jobs data before taking new positions in gold," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management, to Reuters earlier.

"The gold market is waiting for fresh incentives, but gold is more likely to head up again as the weakness in the Dollar versus the Euro is drawing a lot of interest in gold."

Watching the Euro to forecast the gold price, however, has proven a losing move over the last month. (Click here to learn why the US numbers matter to gold investors...)

"Everybody was looking at the weakening Dollar as a big boost to the gold price," noted Matt Zeman, head metals trader at LaSalle Futures in Chicago, yesterday, "[but] the price has fallen.

"Fundamentally, gold should be going higher."

As gold failed at $692 per ounce at the start of last week, the Euro broke higher against the Dollar to a fresh lifetime high at $1.3682.

The end of next week will mark the 12-month anniversary of gold's "cathedral spire" to 26-year highs above $725 per ounce.

Trading more than 6% below that peak – and having failed twice at $692 in the last month – gold now looks vulnerable, according to several analysts.

ScotiaMocatta, one of the leading bullion banks, says that the recent price action is "not encouraging".

"Further weakness may be in store."

But reading the weekly charts, Christopher B. Langguth – a technical analyst at Mitsui – says "there is still no reason to be short gold." (Get a long-term technical analysis here...)

Reuters reports Tokyo dealers calling for a return to $692.50 when the Japanese markets re-open at the start of next week.

"I personally think the [spot] gold price will reach $700 by the end of June," says Yukuji Sonoda, precious metals analyst at Daiichi.

In the gold mining sector overnight, Barrick Gold – the world's biggest gold miner – announced that it's restarted gold production at its Porgera mine in Papua New Guinea.

Gold production at the 20-tonne per year mine was shut for one week following a dispute with local landowners.

Barrick also announced its first-quarter figures, reporting gold output above 62 tonnes at a cash cost of $313 per ounce – more than 6% cheaper than target.

Yet Barrick still managed to lose money between Jan. and March thanks to the cost of closing out its remaining "short" position in the gold futures market. (Get the full story on gold mining stock hedge books here...)

"Between Barrick Gold's announcement today and Lihir Gold's announcement two weeks ago," says Chris Powell for, "the two companies have just taken almost $1.1 billion in gold out of the market."

What that money hasn't done, however – just like the $17 billion spent on mergers & acquisition in the gold sector last year – is add anything new to future gold production.

More money, in fact, means less gold. Read more here now...

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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