Gold News

Gold "On a Mission" as Bonds, Oil & Stocks All Rise, US Fed Policy Attacked in Japan & China

The Gold Price jumped to fresh all-time highs for Dollar investors at the start of Monday's dealing in Asia, rising further to a new record Gold Fix of $1128.75 an ounce mid-morning in London.

Commodities, stocks and government bonds all rose together as well, pushing London's FTSE100 share index to new 2009 highs above 5360.

"Gold's upward climb is so far proving to be relentless," says Dr. Edel Tully in her latest market analysis for precious metals dealers Mitsui.

"It is behaving like an asset on a mission, and that mission is firmly directly to making new nominal highs."

"Gold is bullish, and there is no sense in shorting the metal," agrees Walter de Wet at South Africa's Standard Bank, also in London.

"Our preferred strategy since June has been to buy the dips – we believe this still holds."

World stock markets also rose early Monday on news that Japan's economy grew faster-than-expected in the third quarter. The Yen crept towards a one-month vs. the Dollar, which also ticked lower against the Euro and Sterling.

The Gold Price for Eurozone and UK investors rose to its best level since Feb. 24th above £676 and €754 an ounce respectively.

"The most recent break-out in the Gold Price in US Dollars has caused most gold prices to start trending higher at the same time," notes Evy Hambro, head of two commodities funds at BlackRock, the $1.4 trillion assets manager.

Forecasting that central banks around the world will now be net buyers of gold for the first time since 1988 – a claim made by the GFMS consultancy in April and by European Central Bank manager Paul Mercier at the London Bullion Market Association conference earlier this month – Hambro says that "Gold's role is gathering a lot more attention in terms of risk diversification.

"When you start to see the price rising in a range of different currencies, it is a clear sign of a very strong market to come," he told Reuters overnight.

Latest data from US regulator the Commodity Futures Trading Commission (CFTC) show the number of Comex Gold Futures and options contracts swelling above 700,000 for only the third time ever in the week to last Tuesday.

Growing by 7.3% from a week before – and larger by one-half since this current bull run began on Sept. 1st – the surge in betting on US gold derivatives stands in contrast to unleveraged investments such as Gold ETFs and coin dealing.

The world-leading SPDR Gold Trust grew by less than 0.5% last week. "[The price surge] has created some new buyers," said one coin dealer to Numismaster, "but supplies are still pretty readily available.

"I have had no problem getting quick delivery of anything."

On the political front this weekend, monetary officials from both Japan and China accused the United States of keeping interest rates too low for too long, risking sharp inflation and fresh asset-price bubbles.

"By raising inflation expectations or by generating expectations for a weak Dollar, this may give rise to another problem," said Bank of Japan governor Masaaki Shirakawa at the Europlace Financial Forum in Tokyo, "namely that the fiscal burden increases and in turn the need for adjustments in the government's balance-sheet arises."

In Beijing, Liu Mingkang – chairman of the China Banking Regulatory Commission – said that the US Federal Reserve "is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets.

"The situation has already encouraged a huge Dollar carry trade and had a massive impact on global asset prices."

Today the price of crude oil bounced more than 1% from last week's drop to trade above $77 per barrel – well over twice its price of Jan. 2009.

Base metal prices all opened the week higher at the London Metal Exchange. "The only thing you can put your finger on is the gold rally," says one trader to Metal Bulletin.

"Gold investment demand continues to enter the market even at these unprecedented levels," says a precious metals dealer in a client note.

"The strength of the Gold Price in recent months suggests that investors still have their doubts about unconventional [monetary] policies," says Stephen King, economist at HSBC bank in London, writing today in The Independent.

"They're buying [gold as] insurance in case of failure. They're right to do so."

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Adrian Ash

Adrian Ash, BullionVault Gold News

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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