Gold slipped to a fresh three-week low beneath $898 per ounce early Thursday in London, as a sharp bounce in the US Dollar forced a drop in equities, crude oil and the Euro.
Short-term US Treasury bonds also capped their eight-day losing streak, however, pushing the two-year yield down to 2.20%.
"There is a raft of data out of the US later today," notes Mitsui, the precious metals dealer, "including jobless claims, durable goods orders and new home sales figures.
"Any improvement in these figures would see the Euro – and as a result, the precious metals – test the downside again."
Precious metals ticked lower against the Dollar in early trade, but the European currency fell faster still on the weakest reading of German business confidence in more than two years.
Versus the US Dollar, the Euro fell almost 1.5¢ to a one-week low of $1.5720 after the Ifo Institute's survey of 7,000 firms pointed to "a slower pace of business activity" in the world's third-largest economy.
Following this week's marked decline in Belgian, French and Dutch business confidence, one currency analyst called the German data "pivotal" for the Euro.
Today's 1.1% drop in the single currency pushed the Gold Price in Euros higher by 1.3% from yesterday's low, recorded at what looks increasingly like key support near €565 per ounce. (See this level in Euro Gold Prices here...)
Overnight in India – destination for 20% of all gold sold in 2007 – physical gold dealers reported strong sales ahead of next week's Akshaya Thrithiya festival.
This auspicious "festival of lights", marked across the southern states and cities of Kerala, Bangalore and Chennai, saw a surge in Gold Buying in both 2006 and 2007.
But so far in '08, jewelry buyers have been put off by record-high Gold Prices vs. the Indian Rupee.
"People purchased what they wanted yesterday," said on gold importer in New Delhi to Reuters today. "Now they want more dips."
"Demand is there, but it's not huge like we saw last year," agrees Mahendra Bafna, head of Riddisiddhi Bullions in Mumbai.
Here in London this morning, the FTSE stock index fell 1.9% to a one-week low as housing and finance shares slumped after Persimmon – a major home-builder – said "the unprecedented tightening in the mortgage market has caused lower [UK] sales volumes and increased cancellation rates."
Brent crude oil ticked 0.5% lower to slip below $116 per barrel, but European coal prices for leapt to a new record high, driven by a 58% rise in freight rates since the end of January according to a Bloomberg report.
Copper prices also jumped on news of fast-depleting stockpiles in London, New York and Shanghai, which shrank by one quarter since the start of the year. The world's biggest mining group, BHP Billiton, saw its Australian copper output fall 8% between Jan. and April, leaving the market "short" according to an analyst at Sucden Metals in London.
In soft commodities, rice futures climbed to a new all-time high overnight, even though Japan – which claims to be self-sufficient in this staple grain, a tenet of national pride – said it will delay seeking new imports until prices ease off.
"It is better for Japan not to import rice while a price rally continues," said the head of Unipac Grain in Tokyo to Bloomberg, "because Japan doesn't need supply from abroad."
World rice costs have doubled in the last 12 months.
The Indian government is now considering export curbs to tackle inflation in its domestic rice prices.
Overall, the cost of living in India is rising at a three-year record of 7.4% annually.
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