Gold News

Gold Investing Jumps on China's 10,000-Tonne "Task Force", Tokyo Queasing & the End of Barrick's Hedge Book

Gold hit a new intra-day high of $1198.65 in London trade early Tuesday, driven higher by fresh investing, as world stock markets leapt and the US Dollar sank after Dubai World – which effectively defaulted last Thursday – said it's in talks to restructure almost half of its $59 billion debts.

The Dollar fell below $1.50 per Euro for the third time in six weeks. Crude oil jumped above $78 a barrel.

Mid- and long-term government bond prices fell everywhere bar Japan, which today announced a fresh $114 billion of quantitative easing.

The world's largest Gold Mining firm, Barrick Mining, said just ahead of the New York opening that it's closed the remaining "forward sales" on its hedge book, and "now has full leverage to the Gold Price.

Further press reports out of China meantime said State Council advisor Ji Xiaonan believes Beijing should start investing in at least 1,000 tonnes of gold per year for its official reserves.

"We suggested that China's Gold reserves should reach 6,000 tons in the next 3-5 years and perhaps 10,000 tons in 8-10 years," the China Youth Daily quotes Li, who said he led an expert 'task force' on the matter last year.

"That is in line with many officials' view that China should decrease the proportion of its $2 trillion foreign exchange reserves held in Dollar-linked investments and raise its gold holdings to diversify its portfolio," says Australia's ABC News.

The Gold Price in Chinese Yuan this morning jumped to new record highs above CNY 8160 per ounce.

Gold also broke new record highs vs. the Euro, trading above €795 an ounce and finally topping the intra-day peak of 19 Feb. 2009.

Tuesday morning's Gold Fix – set as a clearing price for London's largest dealers and used as a benchmark worldwide – hit new record highs against the Dollar, Euros and Sterling.

The Gold Price in Japanese Yen, Swiss Francs and Canadian Dollars peaked just shy of last Thursday's new all-time highs.

Measured in Australian Dollars – now paying 3.75% per year, after the third rate hike in 3 months by the Reserve Bank in Sydney – held one-sixth below Feb. 09's record high.

"Growth in 2010 is likely to be close to trend and inflation close to target," said RBA governor Glenn Stevens, "with the risk of serious economic contraction...having passed."

In US Gold Investing, New York's SPDR Gold Trust yesterday added two tonnes to its bullion hoard, held at HSBC Bank vaults in London to back the value of its "gold tracking" shares.

The world's largest Gold ETF, the SPDR grew its holdings by 2.4% last month, but failed to record new record volume with 1129 tonnes of metal.

Latest data from US regulator the Commodity Futures Trading Commission, released Monday night, meantime showed the open interest in US gold derivatives shrinking by 10% in the week to last Tuesday.

Down to a 3-week low, the total number of Comex Gold Futures and option contracts remained one-third larger from the start of September at a near-record high. And as overall open interest fell back, the "net long" position held by speculative traders as a group reversed the previous week's drop, swelling by 2.2% to equal a claim on 992 tonnes of Bullion.

"The case for Gold remains bullish, with investment demand yet to show signs of abating," reckons Andrey Kryuchenkov, analyst at VTB Capital.

"Physical buying continues apace, and investment demand is strong," says Walter de Wet at Standard Bank, also in London.

"There is a genuine investment demand for gold," says J.P.Morgan's Ian Henderson, manager of the former investment bank's Natural Resources Fund, "which is something we haven't seen for a long time."

"Our positive view on the Gold Price led us to accelerate the elimination of these [forward] contracts ahead of the schedule we established," said Aaron Regent, Barrick Mining's president and CEO in this morning's press release.

"Barrick's gold production and reserves are now completely unhedged and our capital structure has also been simplified," he added, pointing to what was a 12-month plan as recently as Sept.

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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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