Gold News

Gold Slips Again as Stocks Bounce, US Govnt Deficit Hits $1.75Trn, Financial Watchdog Still "Unfit for Purpose"

The Spot Gold Price slipped further in Asian and early London dealing on Thursday, falling to a two-week low beneath $940 an ounce as world stock markets rose for the second time in 13 sessions.

Euro and Sterling Gold Prices traded some 7% below last week's highs, while the Dollar weakened on the currency markets.

Crude oil jumped again to $43.50 per barrel. Government bond prices slipped.

"It may be just medium-term profit taking," said one London currency trader in emailed comments to BullionVault, "but the momentum in gold's clearly backed off since [Fed chairman] Bernanke's comments on reining in inflation over the next couple of years."

On a technical analysis, "The price is still above the 30-day moving average [now at $919], which may act as support if prices drop further.

"The bottom of the channel upline starting end-Oct. comes in between $880-900."

Wednesday saw the net assets held in trust by the New York SPDR unchanged for the fourth session running at 1,029 tonnes, confirming what several analysts called "fatigue" amongst large institutional gold buyers.

The world's largest Gold ETF, the "Spider" had previously added gold to the assets backing its shares – intended to track the Gold Price – on 21 out of 33 trading sessions in 2009.

Private investors have also been acquiring gold in record quantities since New Year's Day, with almost £1 in every £100 of net bank-account withdrawals by UK households last month being transferred to Buy Gold at BullionVault.

Accessing live gold-market prices and buying Gold Bullion as their own physical property, BullionVault users now own almost 14.5 tonnes of large, wholesale market bars in secure New York, London and Zurich vaults.

"The firm, which has a £250 million turnover ($355m) and 12 staff in London, is now the biggest provider of gold bullion to private UK buyers," says a detailed report in The Daily Telegraph.

Over in the retail Gold Investment market, meantime, "The rush into bullion coins [continues] creating shortages," says the Financial Times today, "as mints across the world struggle to meet the surge in demand.

"The scarcity is lifting coin premiums to as much as 5% above the Spot Gold price."

"Demand for small Gold Bars and coins remains firm," agrees the latest Refining Monitor from Mitsui, a major London dealer.

"For some refineries, production is fully sold until the end of March, and already 50% has been sold between March and July."

Production at South Africa's Rand Refinery – the world's largest precious-metals processor – is running flat out. Demand for the American Eagle, produced by the US Mint, rose 350% last month from Jan. 2008.

But "amid what is shaping up as a mania," says Jon Nadler – senior analyst at refinery and retail group Kitco in Montreal – many "marketing operations [are looking to] fleece customers and offer them one-ounce bullion coins for ridiculous premia.

"Pay 10% or more," Nadler warns, "and you could face a situation familiar to all too many in the rare coin niche...that Gold Prices may head north, but your coins head the other way in value as supplies improve and premia decline."

On the economic front today, US president Barack Obama will unveil a 2009 budget deficit of $1.75 trillion, sources claim.

Equivalent to 12.3% of the US economy, that funding gap will be wider than any time since World War II.

Obama is also set to announce a $634 billion "healthcare reserve", reports the Financial Times, aimed at financing universal health insurance by raising tax rates on wealthier citizens.

And in the financial sector, struggling Swiss finance giant UBS – which reported a record-busting $17 billion loss for 2008, sacking a further 2,000 staff in mid-Feb. – today "astonished investors" by replacing CEO Marcle Rohner with Oswald Grübel, former head of arch rivals Credit Suisse.

UBS stock rose 11% in morning trade, while Credit Suisse added 7% regardless.

Here in London, Royal Bank of Scotland unveiled the greatest-ever UK corporate loss at £40 billion ($56.8bn).

The shares jumped by more than one-fifth as the FTSE100 index of blue-chip UK stocks added 1.5%.

Already 80%-owned by UK taxpayers, RBS also said it wants to dump £325bn worth of untradable assets into the new tax-funded "Asset Protection Scheme" – also launched today – effectively taking state ownership to 95% of the UK's largest bank.

Current RBS chairman Philip Hampton blamed the record-breaking 2008 losses on "unprecedented turbulence", rather than the ill-timed acquisition of Dutch bank ABN Amro in Dec. 2007.

UK finance minister Alistair Darling meantime called on former RBS chairman Fred "the Shred" Goodwin to renounce his £650,000 a year pension.

After failing to monitor and prevent the City of London's reckless lending and toxic investments of 2002-2008 – now costing UK taxpayers £1.5 trillion ($2.1trn) – official watchdog the Financial Services Authority (FSA) is now due to pay its staff £33 million in annual bonuses.

Today the FSA said "risk and compliance" should form the basis of any finance-sector bonuses.

Yesterday FSA chairman Lord Turner told a parliamentary committee that his organization was not yet "fit for purpose".

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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