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Gold Slips with Euro, Stocks & Oil vs. Dollar, Scrap Supply Risks PGM "Correction" But Gold-Scrap "Slowing"

Gold Prices fell hard as New York opened for business on Thursday, sliding 1.4% from yesterday's high as US stocks dropped over 1% and crude oil dropped through $83 per barrel.

New data showed worse-than-expected US jobless claims for last week, plus faster-than-expected factory-gate inflation in March.

The Euro fell hard as the Dollar rose, dropping towards March's 10-month lows as Greek government debt fell sharply once more.

Paris paper Le Figaro said yesterday that France "is ready" to lend Athens almost €4 billion for 3 years at 5% per annum – the first chunk of a possible €45bn agreed by the Eurozone and IMF this month.

The cost of insuring Greek debt against default today rose to a new record high above 5.0% per year.

"The Euro remains on the back-foot, as Greece's problems continue to intensify," notes Walter de Wet at Standard Bank.

"While gold is holding steady on ever-increasing sovereign risk, the stronger Dollar is capping upside. We expect this to remain the case.

"In recent weeks, we have seen decent physical demand whenever gold drops below $1130."

The Gold Price in Euros dipped through €27,500 per kilo as the Dollar rose on Thursday.

UK investors wanting to Buy Gold saw the price fall back to last week's close – the fourth highest-ever Friday finish – at £740 an ounce.

Industrial-precious metals platinum and palladium also eased back, but remained near 26-month highs.

"Given the speed of the rise [in platinum-group metals] over the last month, and the flow of scrap metal now coming back to market, any sort of failure at this level could lead to a significant correction," say metals-conglomerate Mitsui in a note.

"But the longer-term fundamentals still look extremely bullish."

Global demand for platinum fell by 14% last year, the GFMS precious-metals consultancy reported today, led by a sharp fall in auto-catalyst production that came despite tax-funded "cash for clunkers" scheme across Western Europe and North America.

Platinum prices still rose 57% regardless, however, even as the global market moved into a record "surplus" of nearly 1.1 million ounces on GFMS's data.

"Jewelry was the savior last year," senior GFMS consultant Peter Ryan told Bloomberg by phone today.

"The worry now is we're already seeing signs of weaker jewelry demand in 2010 and we're also seeing signs of increased jewelry scrap flows."

Scrap gold grew by 27% to a record 1549 tonnes last year from 2009, GFMS said earlier this month.

Recycled metal accounted for a record 40% of all gold supplied worldwide, according to the consultancy's data.

Former world No.5 gold consumer, Turkey exported nearly 120 tonnes of gold jewelry in 2009 according to Erkan Kurtulmu?, president of the ?stanbul Chamber of Commerce Jewelry Committee and owner of ?nci Jewelry, speaking this week to English-language newspaper Today's Zaman in Istanbul.

"Some 40 tonnes came from gold that was kept under the mattress, back into the market again due to high Gold Prices. Another 40 tonnes was previously imported gold, while the remaining 40 tonnes came from scrap gold which was melted down and reshaped."

Yesterday First Cash Financial, the US and Mexico pawnbroking chain, reported a 26% increase in scrap-jewelry sales during the first quarter of 2010, primarily due to rising Gold Prices but also thanks to a 3% increase in scrap volumes purchased.

"People have only so much [gold jewelry] they can liquidate," notes one scrap-buying jeweler in the US, "and everybody and their sister have been setting up shop to buy.

"About 8 weeks ago, [scrap gold] supply dropped by 60-70% to what I would call typical levels," he tells The Daily Reckoning, confirming that jewelers, wholesalers and refiners nationwide report the same drop.

Over in the Philippines, meantime, the Social Security System said Wednesday it wants to introduce gold trading on the Manila stock exchange, adding that it's already approached the central bank to buy PHP 1 billion ($22.5m) of bullion.

The Bangko Sentral ng Pilipinas currently holds 154 tonnes of gold, according to data compiled by the World Gold Council, the 20th largest sovereign hoard.

That's down by 44% from a record peak of 274 tonnes in early 2003.

"The plan would enable SSS to hedge part of its assets in gold reserves, which is widely considered a safe and stable investment," the Social Security System said in its statement.

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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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