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Gold Gains vs. All Currencies on China Data; Hong Kong Aims to Set "Benchmark" Gold Price; Vietnam Revives Imports

Gold rose to new record highs vs. the Dollar for the fifth time in six sessions early in London on Wednesday, recording an AM Gold Fix above $1114 an ounce.

Up by more than 28% for 2009 to date for US investors, Gold also rose against all other currencies, breaking its best level against the Japanese Yen since July 2008 above ¥3220 per gram.

World stock markets also gained, while government bonds held steady. Crude oil turned higher from $79 per barrel.

Gold touched fresh 8-month highs above €743 and CHF 1121 an ounce for Eurozone and Swiss investors respectively, trading 6% and 4.5% off late-Feb.'s all-time record highs.

"Buying of gold and silver emerged around noon," says one Hong Kong dealer, confirming what both Japanese dealers Mitsui and MKS Finance – a division of the Swiss refining group – again called "a quiet day" for physical dealing.

"That enabled the metals to defy a weak Euro. When the buying was done, the metals resumed their Euro-following mode."

"Gold found the impetus to rally when China's trade balance data was released," says another analyst.

Beijing today reported a better-than-expected 13.8% drop in China's exports for Oct. from the same month last year. Imports, in contrast, were only 6.4% down.

Domestic retail sales rose 16.2%, said the Statistics Bureau. Industrial output rose 16.1% from Oct. '08.

"We're very, very encouraged to see what's happening try to produce an economy more dependent on domestic sources of growth," said US Treasury secretary Tim Geithner of Japanese and Chinese consumer markets this morning in Tokyo.

For the world economy to become more stable, "It's going to be less driven by the American consumer," he went on. "You need to see a change in the sources of growth."

Geithner will join President Obama in Singapore this weekend for the annual Asia-Pacific APEC summit.

China now leads the world in private gold buying, overtaking Indian consumers in 2008 and spending the equivalent of 1.8% of household savings on Gold Bullion and jewelry according to research by BullionVault.

The Hong Kong Mercantile Exchange said today it will launch Gold Futures trading in Jan. 2010, "establishing benchmark pricing of gold in the Asian time zone," according to chairman Barry Cheung.

Forty per cent owned by Chinese state-controlled businesses, the HKMEx had previously hoped to launch local energy-price contracts. It signed an agreement earlier this year to use the territory's new vaulting facilities at Chek Lap Kok airport for settlement and storage.

The HK Monetary Authority – Hong Kong's unofficial central bank according to MarketWatch – opened the vault that same month by moving its two-tonne holdings (now worth $74 million) there from London depositories.

"We remain bullish [on Gold] as long as the market remains above the lower channel support line at 1032.78," says Axel Rudolph, technical analyst at Commerzbank, in a note today.

"The gold/silver ratio is rising once more with gold appreciating at a higher rate than silver and the correlation between the two precious metals decreasing," he adds.

"The up move has been so strong," say Scotia Mocatta's technical analysts, "[the] risk lies with further extension to 1130. Only a close back below 1070 will shake the long metal positions."

In the broader financial markets, UK government bonds rose and the Pound Sterling fell 1.5¢ early Wednesday after Bank of England research suggested it will keep interest rates at 0.5% for at least the next two years to support the inflation rate, money spending, and economic growth.

"Monetary policy cannot – and should not seek to – prevent [the necessary] adjustment" to household and banking balance-sheets, said BoE governor Mervyn King, launching the Bank's quarterly Inflation Forecast.

"But monetary policy can facilitate a smoother path of adjustment towards the rebalancing...and it was for that reason that the Committee extended last week its programme of asset purchases" to £200 billion ($330bn) – equal to 14% of gross domestic product.

On the geopolitical front today, Russia said that gas supplies through Ukraine – path for 80% of Russia's gas exports to Europe – would be suspended if its neighbor misses any monthly payments on the outstanding deal with Gazprom, Russia's state-backed energy giant.

"There will be a great danger of another crisis," warned Dmitry Peskov, a spokesman for prime minister Vladimir Putin.

Ukraine's deputy PM Hryhoriy Nemyria yesterday said that it may delay payments if aid from the International Monetary Fund (IMF) isn't received soon.

Meantime in Asia, the Vietnamese government said it will allow imports of Gold Bullion to resume for the first time in 17 months in a bid to suppress local prices.

Local Vietnamese Gold Prices rose to fresh record highs on the news, equivalent to $1282 an ounce according to Bloomberg data.

"Taking advantage of unstable international Gold Prices and peoples' concern that prices will rise further," said a statement from central bank governor Nguyen Van Giau, "local speculators have pushed prices to a very high level."

Aimed at "stabilizing the gold market and preventing speculation", the statement sent the Vietnamese Dong to a 16-month low on the currency market, down 6.4% on 1-year forward contracts.

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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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