Gold News

Gold Bullion Records "Capped by Scrap Sales" as "Unstoppable" Silver Price Extends 31-Year Highs

Gold Bullion slipped vs. a rebounding Dollar in London on Tuesday, briefly dropping 1.4% from yesterday's new record highs as world stock markets extended their losses.

Major government bonds also slipped as the Dollar knocked almost two cents off the Euro's new four-month high.

Crude oil sank more than 2% following rumors of an emergency output-hike from the Opec nation cartel.

"We believe Opec spare capacity is much lower than the official data suggests," says a note from Goldman Sachs, and "most of the Saudi spare capacity is heavy crude oil."

The rebel-held Libyan oil port of Ras Lanuf today came under fresh air attack from Colonel Gaddafi's forces. The United Nations now estimates the death-toll at 1,000 in 3 weeks of violence, with 200,000 people fleeing North Africa's largest oil producing state.

"Physical gold demand is weak and we are entering a period where rallies are likely to attract more scrap and other gold selling," says Standard Bank's Walter de Wet in a note.

Even at new record highs in fact, "We believe that resistance in the physical market has assisted in capping rallies in gold the past two weeks," but his view on Gold Bullion remains unchanged, says de Wet, repeating his target $1500 per ounce.

"We now see fundamental support below $1,370."

On a technical analysis, "The two-month support line at 1420.10 has shown us how solid it is," says Axel Rudolph  at Commerzbank.

"Last week's sharp drop ended on it [and then] further strength was seen."

Rudolph's latest note for Commerzbank clients also cites the "support at $1322" from the "long term uptrend" starting when Lehman Brothers failed in late 2008.

Over in Silver Bullion – which "seemed unstoppable" at one point on Monday, says MKS Finance in Geneva, rising 3.2% to new 31-year highs – the price today bounced higher from last week's finish at $35.60 per ounce.

In nominal dollars, Silver Prices have only ever been higher on 22 days, all of them amid the "mania" of Jan. and Feb. 1980 which led London auctioneers Phillips to demand that "Silver melting should be halted...[because] many people were selling irreplaceable antique silver items...destroying the national heritage."

Back here in 2011, "The total net long position [in Gold Futures] is now at its highest since the week ending 4 January," says the latest Precious Metals Weekly for ABN Amro from the VM Group, "but it's some way off November and October levels, implying that prices still have plenty of upside."

Overall last week, trust-fund share positions backed by Gold Bullion crept higher as a rise in BGI's iShares product "more than offset the fourth successive weekly fall" in the world-leading SPDR Gold fund, says VM.

"The iShares Gold Trust's assets jumped 6.7% last month," writes Olivier Ludwig at Index Universe, "while those of the SPDR Gold Shares fell 1.3%...suggesting IAU's cheaper expense ratio may be giving it the upper hand among some investors."

Market leader the SPDR Gold ETF charges 0.40% per year for management. Since last summer, the IAU has charged 0.25%.

World No.1 for outright physical ownership, BullionVault charges less than half that much to customers holding $40,000-worth of gold.

"There have been some wholesale swaps out of GLD and into IAU," reckons Paul Weisbruch at the Street One Financial brokerage in Pennsylvania, quoted by Index Universe.

"Why are they doing it? It's strictly expense-ratio related."

Buying Gold today? Make it simple, secure and cost-effective using the world No.1, BullionVault...

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.

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