Gold News

Gold Buoyed by "Zero-Rate Fed", Hits Fresh Euro Record, But "Conviction Buying" Missing

Gold priced in Dollars held just shy of last night's 4-week high in London on Wednesday, trading above $1135 an ounce as strong gains on Asian stock markets failed to carry over into Europe

Gold Prices in Shanghai rose for the third day running, but local dealers called the market "stagnant" compared to platinum and palladium – primarily used in catalysts by the auto-industry – which both rose sharply.

Silver whipped around $18.00 an ounce, little changed from the start of the week.

Crude oil slipped back to $85 per barrel.

"Gold Bullion [is] supported by speculation that the Fed will keep rates near zero for the time being, and higher oil prices," said one Tokyo research analyst to Bloomberg earlier.

"There was very little gold selling in the physical market yesterday afternoon," notes Walter de Wet at Standard Bank in London. "However, buying conviction remains lacking above $1130."

"From here gold will look to take out the March high of $1145," reckons another London analyst, "while silver, platinum and palladium each look to have room to run up."

The Gold Price in Sterling jumped above £750 an ounce Wednesday morning – just £10 shy of the record highs hit this time last month – as the Pound fell on news of weaker-than-expected High Street pricing.

The Euro sank through $1.3350 to the Dollar after new data said factory prices rose by just 0.1% in Feb. across the 16-nation currency zone.

Gold priced in Euros pushed up to a new record high above €27,392 per kilo.

Hong Kong's stock market added 1.8% for the day. US stock futures fell as Treasury bonds rose, pushing 10-year yields further below last week's 10-month high of 4.00%.

On the monetary policy front, the Bank of Japan followed yesterday's rate-rise from the Reserve Bank of Australia by sticking with its record-low rate of 0.1% for the 16th month running.

Minutes from the latest Federal Reserve meeting show policy-makers agreed both to keep interest rates at zero, but also to keep "monitoring financial markets and institutions –including asset prices, levels of leverage, and underwriting standards – to help identify significant financial imbalances at an early stage."

US regulators from the Securities & Exchange Commission (SEC) are today expected to present new rules for asset-backed securities, almost three years after Bear Stearns "Enhanced Leverage" mortgage funds collapsed.

New disclosure rules will apparently force the banks that create mortgage-backed bonds to state whether the home-loans gathered together for sale to other investors are "no doc", "low doc", or "self-cert", as well as what type of mortgage – prime or subprime, teaser or fixed – is involved.

Over in Dublin, Castlestone Management – a $1 billion asset management group – today launched a new share class for its Aliquot Precious Metals Fund, aimed at institutional managers.

Charging 0.25% per year – and with only weekly liquidity for buying and selling units – the fund offers investors "direct exposure and entitled ownership of gold bullion, silver and platinum," but leases out the metal it holds, so as to reduce costs below the typical 0.50% charged by exchange-traded funds (ETFs).

"Gold demand has not only been strong over the last five to 10 years in China but it looks as if it is going to remain strong for a considerable time to come," says World Gold Council managing director of investments, Marcus Grubb, speaking to South Africa's MineWeb.

Commenting on last week's memorandum of understanding between the mining-backed WGC and the world's largest bank by market-cap and profits, China's ICBC, "It is in that context that we...lend our support to the growth of Gold Investment demand in the Chinese market."

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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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