Gold News

Gold "Presents Buying Opportunity" Say China Advisors; Bounces as Stocks, Oil Fall on Fresh Dubai Debt Freeze

Gold traded in a volatile 1.5% range early Monday in Asia and London, bouncing hard from a dip to $1165 as world stock markets unwound last week's gains and crude oil slipped below $76 per barrel.

The "safe haven" US Dollar rose on the forex market, as did the Japanese Yen.

Eurozone investors looking to Buy Gold saw the price retreat to a four-session low by the AM Gold Fix, down 1.1% from last week's all-time record Fix of €787.24 per ounce.

Gold priced in British Pounds traded at £710 an ounce by lunchtime in London, some 2.3% below Friday's new record intra-day peak.

Silver also ticked lower before bouncing, turning higher 4.3% below last Monday's 15-month high of $18.99 per ounce.

"This has once again presented a [Gold] buying opportunity," says one London dealer in a note today.

"Even when gold succumbs to cashing out, it faces renewed demand on dips," agrees a Tokyo analyst, speaking to Reuters.

"We expect a certain amount of consolidation at these levels," cautions the latest technical analysis from Scotia Mocatta.

"Signals are that the Dollar is due for something of a recovery soon," says Phil Smith in his Reuters Gold Technical Analysis, "[and] the Dollar does influence the Gold Price to a large extent."

This morning in Dubai – the Middle East's central "hub" for Gold Dealing and retail – the world's biggest privately-owned real estate fund, Nakheel, asked for trading in three of its Islamic debt bonds to be suspended following the "debt freeze" requested last Thursday by Dubai World, its parent and the state-owned investment fund holding stakes in assets as diverse as Turnberry Golf Course, Montreal's Cirque du Soleil circus, and the QEII cruise liner.

Trading at 65¢ on the dollar at today's open, Nakheel's sukuk bonds due for redemption on Dec. 14th and then May 2010 and Jan. 2011 respectively are worth $5.2 billion in total

Dubai's domestic stock market, open for the first time since Thursday's announcement, meantime fell 7%. It is now closed again for the rest of the week for a series of Islamic and national holidays.

The broader financial sell-off "could give China a buying opportunity to put some forex reserves into gold or oil reserves," says Ji Xiaonan, chair of the Chinese State Council's supervisory board for its investment funds, quoted today by the influential Economic Information Daily.

"If the Gold Price comes down for a while, we might take the opportunity to buy a bit," it also quotes economist Li Yining.

"[But] strictly speaking," the newspaper also quotes Wu Nianlu, a professor at the graduate school of the People's Bank of China, "almost half of our country's foreign exchange reserve is not stable in value and is of high risk," referring to Beijing's existing non-bond investments.

Today's Times of London says that Private Gold-Buying in China will lead the world for 2009 as a whole – confirming what BullionVault forecast in Sept. and quoting senior figures at this weekend's conference of the China Gold Association.

"Demand in 2008 was 395.6 tons, senior figures in the trade body said, but the total figure by the end of 2009 could be well over the 450-ton mark," the paper reports.

Over in India on Monday – formerly source of the world's No.1 private gold demand – the government reported surprise GDP growth of 7.9% year-on-year for the July-Oct. period.

Local Gold Prices dipped to 17,850 Rupees per 10 grams as the Indian currency rose on the news.

"Certainly there is interest at lower levels due to weddings," said a Mumbai bank dealer to Reuters. "[But a] correction is on," countered a market analyst to the Economic Times.

"Our [Gold] bias is on the negative side of profit-taking and Rupee appreciation."

India's fiscal deficit over the 6 months ending October was 61% of the government's full-year target, with expenditure outpacing tax receipts by 150%.

The world's second-most populous nation saw food-price inflation reach a record high of 15.5% this month.

"The fundamentals that are currently driving the price of gold higher have not changed," writes South Africa bullion-dealer David Levenstein at MineWeb today – "the lack of confidence that investors have regarding the major currencies, especially the US Dollar, and the changing attitude of central banks.

"While we have seen the price of crude oil have an influence on the Gold Price, recently this relationship doesn't seem that important."

After India bought 200 tonnes of IMF gold in October, Sri Lanka bought 10 tonnes last week and Mauritius said it acquired two tonnes of metal.

The Russian central bank says it added 15.6 tonnes of gold to its Bullion reserves during October, swelling its hoard by 15% from the end of last year to more than 580 tonnes.

"Unlike its Indian counterpart," as MineWeb notes, "Russia's central bank bought gold produced by the country's own gold mines."

Russian gold miners plan on growing their output by 11% this year, but Australia has now overtaken the United States as the world's No.2 producing nation, MiningWeekly reports, while China's output will confirm its No.1 slot and South Africa falls into fourth place.

"With the continued decline in South African output and lower production in the US in the first half of 2009, Australia has regained the number-two spot," says Dr Sandra Close, director of the Surbiton Associates consultancy behind the analysis.

"Few people seem to realize just how important the gold industry is to Australia."

China's largest Gold Mining firm, Zijin Mining, today suspended trading in its shares pending an announcement regarding an acquisition.

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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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