Gold News

Gold "Breaks Resistance" in Dollars, Makes It 5-in-5 vs. Euros, as Chart Analysts Target $1240

Gold priced in Dollars touched its best level in almost 13 weeks at $1158 an ounce early in London on Friday, rising together with stocks and commodities and setting a fresh record high vs. the Euro.

"Gold looks like a buy given that it has broken through the $1150 topside resistance level," says one bullion-bank's technical analysis, "with $1161 the next major hurdle."

Silver Prices "struggled" on Thursday, the note adds, but continued the 8-day pattern of setting higher intraday lows.

"Gold has firmly established its ground above $1133, the neckline of a reverse head and shoulders," says another dealer, citing "an ideal target of $1240."

A reversal pattern marked by three troughs – the middle trough being lower than the others – gold's "inverse head and shoulders" against the Dollar began after the record spike to $1227 in early Dec..

On the monetary front for Dollar investors, Federal Reserve vice-chairman Donald Kohn repeated last night how US rates will remain near zero for an "extended period" because jobs growth is "extremely weak".

Gold priced in Euros meantime made it 5-out-of-5 for new record highs this week, breaking above €865 an ounce even as the single currency bounced on the forex market.

No Greek bail-out has been requested, Athens' finance minister George Papaconstantinou told reporters today.

"Greece does not intend to make use of the mechanism [agreed by Eurozone leaders last month], but it is very important for our country for this safety net to exist," he said.

"We think an intervention over the weekend is a distinct possibility," countered Swiss bank UBS's economics team in a note.

"We are getting down to two options – an IMF package of financial support or organized debt restructuring," said Investec fund manager John Stopford to the BBC.

It's "increasingly likely" that Athens will be bailed out by the end of May, reckons Nomura strategist Alistair Newton.

"Serious sovereign risk to some Eurozone countries is finally offering support to Gold Prices," noted Andrey Kryuchenkov at London's VTB Capital to Bloomberg earlier.

"Still, once risk aversion recedes, gold is likely to correct lower. We will be paying much more attention to the actual physical side and consumer demand for gold jewelry as we go forward."

Data from mining-backed marketing group the World Gold Council shows that Gold Investment accounted for 37.5% of global demand last year, up from 31.1% in 2008.

Investment demand accounted for less than 10% of global gold off-take in 2001.

Back in Friday's markets, European equities reversed Thursday's losses, while commodities rose across the board.

US Treasury bonds ticked lower, pushing 10-year yields above 3.90%. They hit a 10-month record of 4.00% late last week.

British gilts rose, meantime, even as the British Pound jumped on news that factory-gate prices jumped last month.

Rising at their fastest pace since the crude-oil spike of mid-2008, manufacturing input prices added almost 14% from March 2009 – flatly contradicting the Bank of England's decision to hold interest rates last week at a record low of 0.5%.

Sterling jumped to a 6-week high vs. the Dollar at $1.5380, knocking the Gold Price for UK investors some £5 per ounce below yesterday's near-record highs at £758.

The Bank of England next meets to set UK rates on Mon 10 May – four days after the general election.

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Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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