Gold News

Gold Hits Fresh Euro Record, "Breaks Dec. Downtrend", as Western & Indian Gold Buying Diverges

Gold Prices rose for the fifth day running against the US Dollar early Wednesday in London, touching the best level in 4 weeks at $1127 an ounce and breaking new record highs for Euro investors above €820.

Global stock markets also rose once again, with London's FTSE100 now recovering half of the last month's 9% drop.

The Euro erased a little of Tuesday's sharp bounce vs. the Dollar, but US Treasury bonds continued to tick lower after new data showed the Chinese government selling a record amount of Washington's debt in Dec.

Import-price inflation in the United States jumped to a 15-month high of 11.5% in Jan., the Labor Dept. said.

Crude oil today rose above $77.50 per barrel.

"Gold has pushed through its 50 and 100 day moving averages," notes one London dealer, "and also broke above an important [down] trendline" starting at the record peak of early Dec.

"We believe that Western Gold Investment demand will remain well underpinned," says the mining-financed World Gold Council in its latest analysis, "regardless of whether the economic recovery gathers momentum or stumbles in 2010.

"If the global economy falters," the WGC says in its latest Gold Demand Trends report, "then Western investors will continue to look towards gold for its diversification and portfolio insurance properties.

"Conversely, if the economic recovery becomes more firmly entrenched, then inflation concerns are likely to continue to gain prominence."

New UK data today showed average earnings lagging the 14-month high in consumer-price inflation reported Tuesday.

Thursday and Friday will bring a raft of price-inflation data from the United States and 16-nation Eurozone.

New York's SPDR Gold Trust – the world's largest Gold ETF – yesterday added 3 tonnes to the 1106 tonnes of gold it stores at HSBC bank in London, held to back the value of its stock-market shares.

The first rise in trust-fund holdings since mid-Dec., that addition took the SPDR's stockpile within 2.5% of New Year's record level.

London's GBS gold fund kept its holdings unchanged Tuesday after shedding 4 tonnes to 120 tonnes over the previous three weeks.

It peaked at 137 tonnes last June.

"The outlook for non-Western demand remains price dependent," the World Gold Council goes on, noting that – overall – identifiable gold demand fell 11% last year from 2008, dropping to 3386 tonnes worldwide.

The lowest global demand since 2003 by volume, that very nearly matched 2008's record gold-demand by value as the US-Dollar Gold Price averaged a 12% rise.

On the other side of the commodity trade, "Gold supply in 2009 was up 11% on the levels of 2008," says the WGC report, based on data from London's GFMS consultancy.

The "single biggest contributor" to support – whether through new Western companies such as Cash4Gold or via more traditional Asian cash-raising – was "recycling" by existing private gold-owners selling their metal. It added a massive 1549 tonnes of gold to global supply in 2009, according to GFMS's latest estimate.

Recycling in 2009 rose 27% from 2008 and was larger by almost two-thirds from 2007.

"There was some selling back of gold jewelry by retailers," the WGC says of Oct-Dec.'s 3% rise over the last quarter of 2008. "The Middle East was the biggest contributor to the Q4 increase."

In Dubai this month, the current Dubai Shopping Festival – a twice-annual event organized by the emirate's Department of Economic Development – has seen "subdued" sales and footfall reports JewelleryOutlook.com.

Dubai's Gold & Jewelry Group, which represents over 700 gold retailers, decided not to take part after disappointing sales at the previous event.

"We have seen fewer tourists," the website quotes Joseph Ullas, a manager at one Joyalukkas store in the downtown gold souk.

"However, we are still seeing good business from Indians, especially those seeking diamond jewelry."

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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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