Gold slipped early Thursday in London, losing almost 2% from yesterday's new Dollar record as global stock markets also fell despite a report from the OECD which doubled 2010 growth forecasts for the world's richest economies.
The US Dollar rose sharply on the forex market, but the drop in gold outpaced the drop in non-Dollar currencies, helping the Gold Price in Sterling retreat 1.1% from Wednesday's 9-month highs.
Eurozone investors now looking to Buy Gold saw the price dip €7 per ounce from yesterday's break above €770 – the best level since Feb 23rd.
"As of yesterday, the futures market assigns a 65% probability to flat US interest rates until Jun 2010," says Walter de Wet in today's Commodities Daily from Standard Bank.
"We still see no rate hike in 2010 (unless it's in Q4)...and low rates should continue to support precious metals."
Crude oil and base metals also fell as the US Dollar rose early Thursday, led by copper's retreat from new 14-month highs.
US Treasury bonds rose but UK gilts and German Bunds fell, pushing up the yield offered to new buyers.
"There is a good chance that when New York opens, this dip [in Gold] will be seen by many as a good buying opportunity," says one London dealer, citing "technical support" at $1130.
Hedge fund manager John Paulson reportedly met with investors yesterday to announce a new gold fund, due for launch in Jan. 2010.
Both Reuters and Bloomberg cite attendees at the meeting who said that Paulson – estimated to be worth $6 billion himself – will put $250 million into the new offering.
Paulson & Co. currently holds over 10% of the $30 billion under management in Gold and gold-related investments.
"Higher highs and higher lows keep trend followers looking for a continued bullish move," says Scotia Mocatta in its daily note.
"Our measured target is 1188."
"Gold is holding onto its gains incredibly well considering the lack of support from the Dollar overnight," said another trader to Reuters this morning.
"Momentum in gold is phenomenal at the moment."
Outside the leveraged Gold Futures and options market, however, the latest Gold Demand Trends from marketing-group the World Gold Council shows physical gold buying worldwide holding steady, rather than growing, between July and end-Sept.
Compared with the same period last year, total world gold demand fell 34%. Global gold jewelry demand during the third quarter – which saw the start of India's traditional festive and wedding seasons – was the weakest third quarter so far this decade.
In value terms, however, it was only a two-year low for Q3 at $14.6 billion, rising by more than one-fifth from the second quarter of this year.
Physical Gold Investment demand also rose in cash terms from the preceding quarter, the WGC says. But data provided by the GFMS consultancy also show that total investment demand across the six months ending Sept. 30th lagged the last three months of 2008, and barely matched the third quarter of last year.
It stood 25% below the record sales of Jan.-March 2009.
"Is the current weakness in Indian [jewelry] demand a reflection of changing times, or merely a cyclical issue?" asks the WGC's report. "We believe the latter is the case.
"Gold continues to be an intrinsic and fundamental part of the wedding and gift season, and the primary means by which [Indian] women can protect their personal wealth."
High and volatile Gold Prices "are currently acting as a constraint on demand in India," the WGC concludes. But "gold will remain a key savings vehicle for consumers.
"India is a nation of very high savers – an example which some Western countries could learn from."
Back here in London today, new data from the Bank of England showed the broad M4 money supply – primarily consisting of bank deposits – rising by almost 2% in Oct. from the month before.
But the provisional data, the Bank adds, "suggest that banks' and building societies' deposit and lending business with financial companies that are part of the same group accounted for most of the increase," forcing the central banks' analysts to change their methodology for the forthcoming sectoral analysis of UK money-supply growth.
Japan's All-Industry Activity Index meantime came in lower than forecast for Oct. The Leading Indicators data held flat.
After both the UK and United States reported sharper than expected consumer-price inflation on Wednesday – driven higher by rising energy costs – next week brings German CPI, last seen turning positive from the intermittent deflation of the previous 12 months.
"In the United States literally no one owns gold," writes Richard Russell, author of the Dow Theory Letter for five decades, quoted at TheStreet.com and naming six factors favoring gold right now – from zero per cent interest rates to new central-bank buying by India, Russia and China.
"Rather, US citizens are selling their gold (jewelry) to companies who are advertising that they'll buy 'your overpriced' gold for cash."
The UK's state-owned Royal Mint meantime told Bloomberg News that its production of Gold Coins quadrupled during the third quarter from the same period last year, totaling a little over one tonne of fine gold.
The Royal Mint – slated for privatization but opposed by union leaders – currently charges mark-ups between 24% and 161% on what it calls its "collectable" Gold Coins, including the quarter-ounce Bullion Sovereign.
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