Gold "Well Bid" Near Record Highs as Dollar Gains, Stocks Fall; Euro & Yen Now "Too Strong" for Export Growth
Gold kicked off the fourth quarter of 2009 above $1000 an ounce on Thursday, holding onto yesterday's 1.5% gain as equities fell worldwide and the US Dollar rose on the forex market.
Government bonds were flat. Crude oil retreated from Wednesday's jump above $70 per barrel.
"Despite Dollar strength today, gold remains well bid above $1,000 this morning," says Walter de Wet at Standard Bank. "We view this as very supportive of gold, but support comes mainly from investment demand.
"Physical demand [primarily for jewelry] remains limited."
"[Gold's] key $990 support level has held three times (on the New York close) over the past week," notes the latest technical analysis from Scotia Mocatta.
"The inability to move lower opens up the topside resistance levels of 1019 and 1024. While above 990 we believe the risk is a move to the 2008 high of 1032."
"The next huge step would be the all-time high we saw last year," agreed another trader this morning, speaking to Reuters.
"We've moved on either side of $1,000 in the last two weeks so I don't think this is an important barrier anymore."
UK investors now looking to Buy Gold saw the price move to fresh 6-month highs in early London trade, touching £632 an ounce as the British Pound held below $1.60 on the foreign exchanges.
Euro Gold Prices rose faster still as the single currency sank towards four-week lows beneath $1.4350.
Compared with the pre-Euro price in German Deutsche Marks, Gold has now held above its long-term peak of DM 40,000 per kilo since mid-Jan., averaging more than DM 43,500 this Sept.
"The recent appreciation of the Euro [vs. the Dollar] is beginning to bother policy makers in the Eurozone," reckons Tokyo economist Takeshi Makita at Sumitomo's Japan Research Institute.
"Deflationary pressure is strong."
"We're in pretty dire straits already right now," said Honda Motor's CEO Takanobu Ito in an interview at the HQ of Japan's second-largest automaker today.
"A Dollar-Yen [exchange rate] in the 80s would be too painful" for its exports, he told Reuters.
Today the Japanese Yen traded at ¥89.90 per Dollar, sparking a fresh 1.5% drop in Tokyo's Nikkei 225 share index.
Chinese markets were closed for the National Day holiday. Asian gold dealers expect only "limited business" on Friday as traders take a long weekend.
"The deterioration in the outlook for the US Dollar combined with an improvement in investor risk appetite is propelling Gold Prices higher," says HSBC's senior precious metals analyst James Steel.
"Gold appears poised to challenge its record highs."
"We still see a strict correlation between the [weak] Dollar and gold," said another trader this morning, noting that crude oil remains below its recent highs.
Crude oil and Gold moved higher alongside the Euro, emerging markets and credit derivatives during the global "Reflation Rally" of 2003-2007.
World equities, however, are still one-third off their top of Nov. '07, while US oil futures have lost half their peak off summer '08. The Euro stands 10% below its record level vs. the Dollar.
Priced against a weighted basket of the world's top 10 currencies, gold bullion – as tracked by the Global Gold Index – has gained more than one-tenth in 2009 to date, closing Sept. some 6.5% below its record peak of Feb. this year.
"Right now, the American economy is worth less than the value implied by the market value of its obligations," writes former top-ranked insurance analyst, Morgan Stanley advisor and Bloomberg columnist Alice Schroeder in Australia's The Age today.
"How much less, no one knows. But gold bugs will tell you, privately, that this is why they are buyers. Might as well stock up, they say, before gold becomes a controlled substance.
"I haven't, so far, but the temptation is rising by the day."