Gold News

Gold Rallies Hard as Euro Records New High & Stocks Bounce; Are Central Banks Buying?

Gold Prices leapt 2.2% from a new four-week low in Asian and early London trade on Tuesday, breaking above last week's close to hit $789.65 by the Morning Fix.

"Gold broke down through the uptrend line at $785 yesterday and fell to a low of $773 overnight," notes today's Gold Market report from Mitsui Precious Metals.

"The market looked technically very weak and a correction back to 750 is now a high probability. However, since that low overnight the Euro has rallied strongly against the USD as rumors of another interest rate cut have circulated the market."

The US Federal Reserve today releases the minutes from its Halloween meeting at 19:00 GMT. It next meets on Dec. 11th, and interest-rate futures now put the chance of a further cut – the third since Sept. – at 96%.

The odds stood at only 80% this time yesterday.

"In addition to this pressure, the continued speculation that some Gulf countries may be preparing to ditch their Dollar pegs or at least revalue their currencies is helping gold," the Mitsui team go on.

Rumors are also mounting that Asian central banks are Buying Gold to reduce their US Dollar exposure. "There was the informed speculation by Evgueni Ivanov of Polyus at the RBC Capital Markets gold conference in London a week ago," says Lawrence Williams at MineWeb today, "that Russia has been buying gold to boost the gold element of its foreign exchange reserves.

"There are indications too that some Middle Eastern nations have been buyers as well."

"We got a clue from the timing of the Gold Price rises in October," notes Julian Phillips of the GoldForecaster.com. "The bulk of strong gains happened before either London or New York opened. This tells us the buying came from the Middle and Far East.

"If it was not at retail level, then could it have been at central bank level?" (Get the full story on The Real Price of Gold here...)

As the Gold Market raced higher this morning – adding $11.80 to the Feb. 2008 futures contract – oil prices ticked lower beneath $95 per barrel. The Euro, in contrast, shot to new all-time record highs against the ailing US Dollar.

Gaining 1.5¢ at the start of European trade, the single currency hit $1.4795, more than 78% above its all-time low of Nov. 2000.

The Pound Sterling also shot higher today, even as the Bank of England said growth in the UK money supply slowed dramatically in Oct. to 0.1% month-on-month.

Whitehall's finances also weakened to a two-year low added the official UK statistics agency, but the Pound gained 2¢ in four hours regardless to recover a four-day high of $2.0660.

That capped the move in bullion for British investors wanting to Buy Gold Today, keeping the metal below £383 per ounce for a rise of 1.6% from the overnight low.

Gold Priced in Euros was slower still, adding just 1.2% to hold at €534 per ounce by midday on Frankfurt.

Asian and European stock markets also bounced to cap three days of losses.
Tokyo's Nikkei ended 1.1% higher, while the FTSE in London gained 21 points to 6,142 by mid-morning after losing 170 points on Monday.

Northern Rock, the struggling mortgage bank now underwritten by the UK government –but also unable to find a buyer – sank another 40% to drop below 50p per share after the Chancellor, Alistair Darling, said a return of taxpayers' funds must come before any repayment to shareholders.

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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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