Gold News

Gold gains 2.5% as US equities drop, inflation up, home-building down

From Chris Mullen at GoldSeek.com...

The Spot Gold Market remained near unchanged in Asia and London on Friday, but it then steadily rose throughout trade in New York and ended the week near its high with a gain of 1.00% for the day.

Silver rose to about $13.40 by midmorning in New York before it fell back off a bit in afternoon trade, but it still ended with a gain of 0.23%. The Euro Price of Gold rose to about €494, platinum gained $10 to $1,330, palladium gained $1 to $370, and copper rose roughly 5 cents to about $3.71.

Gold and silver equities traded mostly slightly lower and ended mixed and near unchanged.

In the wider markets, oil ended lower after mixed trade as traders closed out positions in the expiring August contract. The US Dollar index fell and US Treasury bonds rose. The yield on the 10-year fell below 5% on continued worries about subprime mortgages.

The Dow, Nasdaq, and S&P fell over 1% on Friday on poor earnings reports and weakness in the homebuilders continued as K.B.Home said they don’t expect the housing market to bottom until the end of 2008.

Following the sharp drop in new US building permits reported this week – and the increase in core US inflation – next week’s economic highlights will include Existing Home Sales and the Fed’s Beige Book on Wednesday, plus Durable Goods Orders, Initial Jobless Claims, the Help-Wanted Index, and New Home Sales on Thursday, and GDP and Michigan Sentiment on Friday.

"After eating away at resistance steadily and pushing through into the higher $670s gold is showing remarkable strength, out of season," says Julian Phillips of GoldForecaster.com.

"In a time usually dubbed 'the Doldrums' for gold, the Spot Gold Price is showing remarkable resilience. Physical demand goes ‘on holiday’ from the end of May to the second half of August usually, but this year is now seeing investment demand for gold jumping strongly on the back of a buckling buck and a surging oil price.

"Both these features are not short-term weaknesses but structural faults set to remain in place for some time to come. Consequently, gold investment demand has leapt nearly 38 tonnes on the global gold Exchange-Traded Funds alone. This demand is set to continue against a backdrop of continuing subdued Central Bank Sales, until the end of September at least.
 
"Of course once physical demand returns in the fourth quarter of this year it will have to push and shove investment demand to get its share, with exciting possibilities for the gold price."

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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