Gold News

Gold dips in London ahead of key US data

Gold bullion held steady in Asian trade Wednesday, moving in a tight band around $673 before dipping to $671.21 per ounce at the start of London trade.

Trading 0.6% higher from Tuesday's open, however, spot gold prices only managed to recover last week's closing price against the US Dollar.

Gold prices for British investors continued to lag, drifting 2.0% from this time last week.

Spot gold prices in Euros remained 2.6% lower from mid-morning last Wednesday.

"The US Dollar is still at softer levels against the Euro," notes David Moore for Commonwealth Bank of Australia in Sydney.

"That's probably a factor that is supporting the gold price" – but only in Dollars.

Tuesday's weak US inflation data was matched by weaker than expected sales of US securities to foreign buyers.

Net purchases in March hit $67.6 billion, said the Treasury Dept. – higher than Feb.'s figure but 10% lower than forecast.

"March capital inflows to the US dropped to $45 billion from Feb.'s $101.5 billion," adds Standard Bank in its daily gold note.

The US economy needs foreign investment to help defend the Dollar against the weight of US debts. (Learn more about how this "vendor financing" works here...)

"Gold attracted fresh buying [on the news] and lifted toward $670 where temporary resistance was finally overcome.

For investors wanting to buy gold, it "could likely run into resistance in front of $675," says Lloyd. But "the period of consolidation within the current $665 to $675 band should continue."

Today brings a slew fresh data for the professional gold market to analyze.

Japanese industrial production slipped in March, but not as badly as expected. The Yen has no far done little in response – but the Tocom's April '08 gold futures contract closed 0.4% to the good, equal to $681 per ounce.

The contract has now risen 1.6% since bottoming on Friday.

Consumer price inflation in Germany, Europe's largest economy, came in bang on consensus forecasts during April at 1.9% year-on-year, helping the Euro hold steady against the Dollar at $1.3598.

But the European single currency continued this week's 1% climb versus the Pound Sterling, gaining on fresh signals that the Bank of England may not raise its interest rates again in June.

The Bank presents its latest Inflation Outlook report from 10:30am. New data this morning, however, showed average earnings rising less quickly than expected in March.

Including bonuses, UK wage inflation also fell from Feb. – and it remained below Retail Price Inflation, the most trusted measure of Britain's cost of living.

Unemployment, meantime, rose by more than 13,000 to 1.7 million between Jan. and March. (Caught between the rock of inflation and the hard place of tight credit, what will the BoE do next? Find out here...)

And to round off the day of data, the number of new US housing projects, due at 08:30 Washington time is expected to show a further dip.

Added to industrial production data at 09:15 – plus yesterday's drop in CPI inflation – a sharper slowdown than forecast would raise Wall Street's hopes of lower Dollar interest rates ahead.

That would add fresh impetus to gold's data-driven recovery. (Read more about how the US housing market impacts gold prices here...)

"If gold opens New York above last night's close then it should find the momentum to test $680 resistance," says Brandon Lloyd for Mitsui in Sydney.

"The macro picture continues to be supportive to gold re-testing the $700 level in the short to medium term."

If you'd like to follow spot gold prices with a genuine, physical interest in the market, click through and learn more about 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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