Gold News

Gold Heads for Third Weekly Gain on Eurozone Inflation Data & Fresh Surge in Commodity Prices

Gold Prices bounced on Friday from an early dip in London, nearing their third weekly gain in four and recording an AM Fix of $858.75 per ounce – some 0.7% below Thursday's new all-time high.

US crude oil for delivery in Feb. added 11 cents to $99.27 per barrel, while copper and zinc both rose "limit up" in Shanghai, causing a temporary break in trading after gaining 4% for the session.

Soybean futures hit a fresh 34-year high, rising for the third day running alongside corn and wheat.

The unrelenting rise of commodity prices in Dec. kept consumer-price inflation in the 13-nation Eurozone at 3.1% said the EuroStat agency this morning, matching Nov.'s record high and remaining far in excess of the region's official target of 2.0%.

European stocks were mixed in response to the news, holding flat overall by lunchtime in Paris. On the other side of the "stagflation" coin, meantime, the Royal Bank of Scotland's purchasing managers' index for Dec. showed the slowest rate of growth in European services since June 2005. Eurozone bond prices had already risen strongly this week, and today's inflation data failed to prevent the yield on 10-year German bunds slipping 16 basis points from this time last week to 4.18%.

Two-year yields have now lost 18 basis points to 3.77% so far in 2008, but with Eurozone inflation holding at that record high, a majority of economists surveyed by Bloomberg News believe the European Central Bank will be forced to hold its target interest rate at 4.0% when it meets next Thursday.

The first indication of US price inflation in Dec. will come with the release of the Import Price Index – last seen at a record 11.4% year-on-year – on Friday next week (Jan. 11).

Today, meantime, brings the much-awaited Non-Farm Payrolls data for last month, expected to show a slight decline. So too are average US hourly earnings.

"Gold has been pushed to record highs by oil up at $100 a barrel and fears of a recession," says Sasha Naryshkine at Vestact, the South African private client group.

"An added investment boost is the weak Dollar," reckons Reuters today, "which means Dollar-denominated gold is relatively cheaper in other currencies."

But pricing gold in Dollars is merely a convenience for the global investment industry – and Gold Prices in all currencies barring the Japanese Yen now stand at all-time records, too.

British investors Buying Gold at BullionVault on Thursday saw it breach £439 bid in Zurich. For French, German and Italian investors, the Gold Price in Euros touched €589.50 per ounce, a rise of 21% from this time in Jan. '07.

"Short-term price corrections aside," believes Kevin Norrish at Barclays Capital, "we would view these in the context of what remains a strong medium-term uptrend for gold."

A pullback in the Gold Market to $850 or below would represent a significant "buying opportunity" agrees Robin Wilkin, technical analyst for currencies & commodities at J.P.Morgan.

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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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