Gold, Stocks & Euro Bounce as Trichet Hints at Greek Rescue; Potential for "More Liquidation" Challenged by "Safe Haven" Demand
Gold Prices slipped from their best level in 3 sessions for US and UK investors on Tuesday in London, easing back as the Euro currency and Eurozone stocks also cut their early gains.
Government bonds ticked lower, and crude oil pushed up towards $73 per barrel.
Silver erased a 1.6% rally as New York opened for business, holding unchanged from last week's 5-month closing low.
"The pull back is not that great compared to previous corrections," says bullion bank Scotia Mocatta, studying the bullish position of speculative traders in Gold Futures and options – now 15% smaller from the middle of Jan.
"But this could be taken either as a sign that the market remains relatively bullish still, or conversely it also raises the potential for more liquidation."
"Greater declines [in Gold Investment positions] may be evident in the coming week's data," says the VM Group in London.
Adding together the "net long" position of speculators in US and Tokyo Gold Futures, plus the outstanding size of the major Gold ETF trust funds worldwide, the VM Group's Precious Metals Investment Weekly for Fortis Nederland Bank now says that global investment has shrunk 5% over the last four weeks.
China Investment Corp. – one of the world's largest sovereign wealth funds – took a $156 million exposure to Gold Prices at the tail-end of 2009, new US regulatory filings show.
Although small in terms of CIC's total $300bn under management, "It shows a continuation of the fund's strategy," says Japanese metals conglomerate Mitsui, "which...saw it divert around $10bn into commodity-related concerns."
New data today confirmed that China overtook Germany in 2009 as the world's No.1 export nation, as German exports of goods fell by 18% – the sharpest year-on-year since 1950.
"The Dollar might have further to rebound as investors seek out safe-havens and as carry trades are unwound," Scotia Mocatta adds in its latest Precious Metals Monthly, but "this should not prevent Gold Prices from rallying as well.
"After all, the Dollar and gold both managed to rally in 2004 and in the second half of 2008."
"We'd advise taking a defensive view of the Euro," says Standard Bank's Steven Barrow today, because the "debt crisis in the Eurozone is not likely to be resolved in a benign way.
"Policymakers like those at the Fed and Bank of England have essentially chosen inflation through aggressive quantitative easing. Others, like the ECB, have opted not to take this route with the consequence that some members, like Greece, could be heading for default."
European Central Bank president Jean-Claude Trichet today raised hopes of a Eurozone rescue for the Greek government's huge fiscal deficit, by changing his schedule to include a meeting this Thursday discussing the problem.
"There is nothing like a change in a VIP's travel plans to excite the imaginations of market participants," said Stephen Lewis at London's Monument Securities on hearing the news.
Wall Street's S&P index jumped 1% at the start of trade Tuesday, remaining closely tied to the path of Euro/Dollar exchange rates and almost exactly Nailed to the Dollar Price of Gold.
New data here in the UK meantime showed Retail Sales falling faster than expected last month, even as the UK's trade balance worsened sharply.
"Amid the recent flight to safety, gilts have missed out," notes the FT's Alpha blog after the first auction of UK government debt since the Bank of England suspended its quantitative easing program drew tepid demand.
"Gilts are also lower this morning, no doubt unsettled by the latest Populus opinion poll, which showed support for the Labour party up 2 percentage points to 30% and increasing the possibility of a hung parliament."
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