Gold News

Gold Dives 3.1% from Monday's Top on Dollar Bounce; Indian Prices Near All-Time High; Chinese Demand Up 24% in Q3

Gold Prices fell hard in London trade on Tuesday, recording a PM Fix of $810.75 as the US Dollar bounced on the currency markets – some $20 per ounce below Monday's afternoon fix and 3.1% below yesterday's early peak.

Crude oil prices also slid by nearly 3%, dropping below $96 per barrel after Saudi oil minister Ali al-Naimi said overnight that the world's top oil exporter has increased its daily production to nine million barrels, just below its current quota.

The Opec oil cartel meets next week, and it's expected to discuss raising output limits in a bid to ease the recent surge in world energy prices.

In the stock market, meantime, Tokyo's Nikkei ended the session 0.6% higher while the Hong Kong market dropped 1.5%. By mid-afternoon in London, emerging markets as a whole stood more than 0.9% lower and Western Europe's major bourses shed 1.5% on average despite news that Barclays bank – rumored to face $10bn in mortgage-related losses – is on target to grow its earnings as forecast in 2007.

Citigroup, the world's largest bank – which lost its CEO after admitting to $7bn losses on its mortgage book last month – said overnight that it will sell $7.5bn in stock to the Abu Dhabi Investment Authority.

The government-owned petro-fund will become Citi's biggest shareholder with almost 5% of the outstanding issue, and buoyed by the Arabian support for US financial stocks, the broad US stock market gained 0.8% at the open.

Back in the Gold Market, "today's February gold futures activity frequently occurs at the end of a rally," said Christopher Langguth in his technical analysis for Mitsui this morning. "The high volume is usually a sign of a market at a climax, but this is also the last week to close out a December position without being involved in deliveries.

"At the moment the market is neutral."

Gold Prices in India – the world's hungriest market for physical gold – today pulled back from near-alltime record highs at 10,655 Rupees per 10 grams. Reports from New Delhi cite heavy buying by jewelry makers as the peak wedding season wears on.

The current record Gold Price for Indian consumers was reached at Rs 10,700 per 10 grams on 12th May 2006.

In China, meantime, "demand for gold rose in the third quarter as a hedge against inflation and on expectation of strong returns from the stock market," the World Gold Council told the Shanghai Daily on Monday.

The WGC now expects 2007 to see record Gold Buying on the Chinese mainland, as well as Hong Kong and Taiwan. It rose 24% between July and the end of Sept.

"[China's] strong economic growth and expectation of high returns from the red-hot stock market have given residents more money for spending," the WGC reports, pointing the 100% gains delivered by the Shanghai Composite Index in the first nine months of this year.

Earlier today in Beijing, a delegation from the European Union arrived to call for a revaluation of the Yuan, even as the People's Bank of China priced the Chinese currency at a record high of 7.3858 per Dollar.

The Yuan has risen 5% vs. the Dollar so far this year, while the free-floating European single currency has gained more than 11%.

The Euro today held at $1.4850 while the British Pound slipped one-third of a percent to $2.0660. The Japanese Yen also retreated against the Dollar after pushing it to a 29-month low in Tokyo trade.

The Yen fell from 1% to ¥108.50 per Dollar on news that Japan's corporate price index rose in Oct. – the 11th month running of rising prices for business services – but at a much slower pace than in Sept.

Japan has now battled recession for more than a decade thanks to the debt-deflation sparked when its stock-market and real-estate bubbles burst at the end of 1989.

Tokyo gold futures crept 0.2% higher ahead of this morning's drop, reaching the equivalent of $842 per ounce for delivery in Oct. '08.

Gold Priced in Euros fell to a two-session low of €544.20 per ounce as the market slumped at the New York opening. For British investors wanting to Buy Gold Today the metal dropped £14 per ounce from yesterday's new all-time highs above £404 per ounce.

"There is some small long liquidation" in the Gold Market today, says Frederic Panizzutti, an analyst at MKS Finance in Geneva, "probably because of the stronger Dollar and weaker Euro."

"We expect gold to find some support around current levels and to go back up at some stage. Market sentiment remains positive.

"But as we move towards the end of the year, liquidity issues could mean more erratic trading."

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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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