Gold News

Gold rises 0.8% into London close as Wall Street hits new highs

Gold prices rose strongly as London closed for business on Monday, adding 0.8% between the PM Fix and the end of trade at $663.57.

More than $2 higher for the day, spot gold prices bounced despite a sharp drop in the Euro vs. the Dollar – confounding investors who rely on the single European currency to gauge the direction of gold.

Priced in Euros gold rose €3 per ounce from the European opening to end the day just shy of €493, a three-session high.

For British investors wanting to buy gold now, the metal ended the day above £336.80.

Gold priced in Pounds Sterling rose 0.4% for the day.

"We have got a few important data points coming out late this week," said Michael Widmer, head of metals research at Calyon, earlier to Reuters, "especially in the Eurozone.

"I can imagine that until then we are going to stay in a relatively quiet market."

Tuesday will bring the ZEW sentiment index from Germany, Europe's largest economy. Thursday and Friday will bring housing sale data from the US.

Weak home sales and the ongoing collapse of the US subprime lending sector had led Wall Street to expect lower Fed interest rates ahead – bearish for the Dollar and bullish for gold. (Find out why here...)

But disappointment at gold's failure to breach the $725 level hit in May 2006 saw speculators and private investors alike sell their holdings aggressively last week.

Net long positions in the gold futures market fell by the equivalent of 3.6 million "paper ounces" according to official data.

Investors holding exchange-traded gold shares also fled for the exits last week, cutting demand for StreetTracks GLD – the world's largest gold ETF – by 6.3% since this time in April.

But longer-term investors continue to buy physical gold bullion, concerned by the ongoing destruction of money's purchasing power and credibility.

Novartis, the Swiss drugs giant, said Monday it's putting 4% of its pension fund assets into precious metals.

That's an investment worth $11.37 billion.

"The only reason why we see a bit of profit-taking here is on the back of the Euro/Dollar," reckons Frederic Panizzutti, metals analyst at MKS Finance.

"The market is very quiet, but we expect it to find some support around $660 or slightly below."

In the broader financial markets on Monday, the US stock market climbed towards fresh all-time highs, driven by Blackstone private equity getting $3 billion from China's foreign currency reserves.

Crude oil prices in London climbed back above $70 per barrel – and WTI traded in New York regained $65 per barrel – as the Opec cartel said it wouldn't increase output to satisfy US demand during the long summer "driving season".

Meantime in Lebanon, the army continued to fight with militants hiding in a Palestinian refugee camp near Tripoli.

The fighting has so far killed 71 people.

Shouldn't gold trade much higher on the threat of higher oil prices and geo-political troubles?

For the real story on what's driven gold higher since 2001 – and why it looks set to keep rising for long-term investors – click here and read on...

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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