Gold News

Spot gold prices dip; Jim Rogers points to mid-70s pullback

Anyone selling gold or daring to "go short" today may come to
regret their decision says Jim Rogers, the world-famous author
of Adventure Capitalist whose global commodity fund has risen more than 250% since launching in 1998.

"Gold rose 600% in the 1970s and then went down nearly every month for
two years," he notes in an interview from his New York home with
Financial News today.

"Most people gave up – but then it went up another 850%. That’s what happens in bull markets." (Get the big picture for gold here...)

History aside, however, the spot price of gold continued to dip in the early London session on Wednesday, falling to $658 per ounce as currency traders raised the stakes on higher global interest rates ahead.

The Sterling price of gold bullion dropped below £333.25 on news that the Bank of England voted unanimously to raise Sterling interest rates earlier this month.

That data also pushed the Euro down to a 10-day low vs. the Pound beneath £0.6800 as well as a fresh one-month low against the Dollar of $1.3420.

"The Dollar is likely to remain well supported before [tomorrow's] data," reckons one currency strategist in London referring to Thursday's US home sales figures.

(Why do interest rates matter to gold – and how can it help defend you against low to negative returns on cash? Find out more here...)

The gold market's huge volatility of the last 10 weeks – up from $635 to $692 and then down below $660 today – has come alongside huge sales of gold bullion by Western central banks.

In the week ending Friday, said the European Central Bank yesterday, two European members of the Central Bank Gold Agreement sold around 17.7 tonnes.

That took the CBGA total since March 9th to nearly 120 tonnes. Only 150 tonnes were sold between Sept. and March notes

Many commentators think the record sales by Spain are an attempt to manipulate the gold price; whatever the truth of those claims, the fact is that Madrid actually needs cash – and fast – to cover a huge shortfall in the country's balance of trade. (Read about the risks of a Eurozone break-up here...)

But further pressure on the gold price is also coming from India, meantime, where physical demand from jewelers remains thin.

"The arrival of fresh stocks forced jewelers to sell a part of their holdings to avoid further losses," reports the Economic Times. "Market men said the end of the Indian marriage season has kept physical gold buyers out of the window – and hence lower prices are also failing to lure buyers."

Looking further ahead, however, "there is a lack of exploration expenditure and a lack of discovery of any significant size," reckons Ian Cockerill, CEO of GoldFields – the world's fourth largest gold producer.

"The world is consuming 85 million ounces of gold a year but the industry is by no means finding and replacing that amount," he told the Paydirt conference in Perth, Australia, yesterday.

Speaking at the same event Monday, Russell Clark – head of Newmont's operations in Asia and Australia – agreed that "there are fundamental factors...which will continue to pressure the gold price to nudge higher" – most especially falling gold output and the lack of large new gold discoveries in the major producing nations.

In short, gold – a proven store of value for more than 3,000 years – remains rare. Official currencies on the other hand are in ever-greater supply.

To put a portion of your savings into gold today as a defense against monetary inflation, visit 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.

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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