Gold Investors to "Buy the Dips" as Mid-East Ramps Up Buying, Exploration; US Fed Moves to "Quantitative Easing"
Spot Gold prices drifted lower early in London on Tuesday, trading $10 an ounce below last week's close as European stock markets lost another 2% and crude oil fell towards fresh 21-month lows.
"Looking forward, we think the need for safe-haven investments will grow," says analysis from London-based precious metals dealer Scotia Mocatta, "while at the same time the level of distressed selling may ease.
"[That] is likely to see Gold Prices trend higher again. If fresh weakness is seen, then expect dips to attract even more buying."
Over on the forex market, the major currency pairs held inside their tightest ranges for a week, with the Euro worth $1.2620 and the British Pound holding just north of $1.5000.
By lunchtime in London, Gold was trading 1.1% lower from Friday's close vs. the European single currency and 3.0% lower against the Pound Sterling.
"Gold is caught between being a safe haven investment and being weighed down by the US Dollar," reckons Zhu Lv, head of research at the Shanghai Tonglian Futures Company, speaking today to Bloomberg News.
"Trade has been lackluster of late because of this lack of direction."
Today in India – the world's No.1 gold retail market – the price of gold ticked higher as the Rupee slid yet again on the currency market, rising to Rs 12,100 per 10 grams on what local dealers called fresh buying amid the current marriage season.
In Mumbai, the Sensex average of India's largest stocks closed below the 9,000 level for the third time in six weeks, flirting with a 3-year low that's almost 58% below January's record high.
The Indian government meantime announced a half-trillion Rupee package of infrastructure spending (US$10bn).
Unconfirmed reports from Riyadh say that private investors in Saudi Arabia have bought more than SAR13 billion of physical Gold Bullion in the last two weeks (US$3.5bn).
"Many Saudi investors see this as the right time for making Gold Investment as its price is the most reasonable at present," one local gold analyst is quoted by the Gulf News.
The Iranian press reported at the weekend that Mojtaba Hashemi Samareh, a "top advisor" to the president, Mahmoud Ahmadinejad, said a portion of Iran's $120bn in foreign currency reserves had been transferred into Gold.
The oil-dependent Opec state does not publish official gold reserves or currency data, but the decision to Buy Gold was made by Ahmadinejad himself according to the Jahan-e-Eghtesad newspaper.
Yesterday the chief of Iran's Geological & Mineral Exploration Organization told the Tehran Daily that 15 tonnes of proven reserves will be added to the country's mining resources by end-March '09.
Current proven Gold Mining reserves stand at 250-300 tonnes, he added, with annual gold production set to rise "long term" to 25 tonnes from the current five.
The pariah state also announced joint-venture exploration outside Iran, starting with the other nine members of the middle-eastern Economic Cooperation Organization (ECO).
ECO in turn says it has signed gold exploration deals with several African and Latin American states.
Meantime in Washington, "the two top salesmen for the $700 billion financial bailout are in for a grilling by Capitol Hill lawmakers" today, reports the AP, "just one week after the administration officially ditched the original strategy behind the rescue."
US Treasury secretary and Fed chairman Ben Bernanke have already lent and gifted $3.45 trillion in emergency aid to the banking on some estimates, "and that's before a likely handout for the auto industry," notes Tech Ticker.
"The Fed's focus has now shifted from easing the interest rate to increasing the quantity of money," agrees John Kemp at Reuters, noting how total sum of Fed credit extended to private banks jumped in the week-ending Nov. 12th to $2.2 trillion from the previous weekly average of $0.9trn – a clear policy of "quantitative easing".
"As often happens, the 'gold bugs' will turn out to be right in the end," writes Martin Hutchinson at PrudentBear.com, "even if their performance during 2008 has been dreadful.
Pointing to the 64-70% losses suffered by investors following the gold trading and mining-stock tips of Harry Schultz, Howard Ruff and Jim Dines, "for those that survive, 2009 is likely to be a banner year," says Hutchinson.
"The turn from economic decline (but not true deflation) to inflation will be well indicated by the Gold Market, which can expect to surge as the economic bottom is approached."