Gold News

Gold rises vs. US Dollar; Japanese funds buying gold as a "safe haven"

Spot Gold Prices rose steadily through the Asian and early London sessions on Thursday, touching $665 per ounce versus the Dollar just ahead of the US open.

Gold also recovered more than 0.7% from yesterday's low against the British Pound, but only just broke above €482 per ounce for Eurozone gold buyers.

"Funds are shifting more into gold for safe-haven reasons as currencies, stocks and bonds are all volatile now," said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo, to Reuters earlier.

For Japanese investors, Spot Gold Prices held above ¥81,000 this morning, more than 3% higher from the low of late June. The April '08 gold futures contract traded at the Tocom gained 0.4% today, closing at the equivalent of $670 per ounce.

"The Gold Market is gathering a lot of interest on price dips," says Kageyama, "as technical sentiment improved after breaking through $665 yesterday."

The key level of $665 per ounce marks the 50% retracement of the Gold Market's drop from April's top of $693 to June's low of $638.90, according to a Reuters report. And "while gold did trade through the 100-day moving average [now at $663.83] and the key $665 resistance level on Wednesday," says Standard Bank in Johannesburg today, "the metal really needs to post a closing above at least one but preferably both markers before any chance of a rally to the next target at $674.

"Repeated failures would only encourage a build-up of downward pressure that could threaten to force the metal lower into the $645 area, being the lower edge of the current range."

In the currency markets the US Dollar continued to slide overnight, with the British Pound re-testing Wednesday's new 26-year highs above $2.0370 before falling back. The Euro touched a new all-time high of $1.3790.

The major European stock markets crept higher to regain the 0.3% lost by the FTSE EuroFirst 300 index on Wednesday. Ten-year US Treasury yields slipped two pips to 5.07% as government bond prices rose. In Tokyo, shares in Nomura Holdings lost 2.7% after a report from Deutsche Bank warned that Japan's largest securities firm may suffer losses related to complex derivatives based on subprime US home loans. Wall Street futures were flat.

"The basic tone for all precious metals at the moment is range-trading, but the downside is limited because of strong physical demand," reckons Nobito Kaneda, a Japanese trader at Sojitz Corp. in Tokyo.

"Gold dipped below $660 yesterday and attracted some buying."

Demand for Physical Gold Bullion rose strongly in both India and Turkey earlier this week, according to analysts at Goldman Sachs. On the supply side, meantime, the latest US Geological Survey reports higher production in April from March – up 4% per day. But US gold mining output slipped from a year earlier, sliding 6% from the 2006 daily average.

Business Report in Johannesburg says that the Solidarity labor union has today rejected the 7% pay offer made by South Africa's leading gold mining companies. AngloGold Ashanti, Gold Fields and Harmony Gold Mining had already raised their offer from 6%. Further talks between Solidarity, the National Union of Mineworkers and the United Association of South Africa will be held on July 23rd.

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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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