Gold News

Gold prices ends unchanged; investors short of commodities "crazy"

Spot gold prices dropped back towards the London close on Monday, giving back all of the day's gains to end just north of the PM Fix at $662.59 per ounce.

The move came on the back of fresh Dollar strength that showed up despite stronger-than-expected numbers out of Europe.

Germany's ZEW sentiment index and trade balance both beat consensus forecasts by a huge margin.

But by the end-of-play in London's dealing rooms, the Euro was back at $1.3454 – unchanged for the day versus the Dollar. So too was gold.

"The Dollar is picking up a little steam, and that's putting pressure on the gold market," reckons Leonard Kaplan, president of Prospector Asset Management in Illinois.

"We're beginning to see a global movement toward higher interest rates," he added, "and that generally hurts gold."

But Tuesday gave little sign of higher interest rates capping speculative excess in the world's major stock markets.

The Organization for Economic Co-Operation & Development (OECD) this morning issued a report saying that the global boom in private equity buy-outs of listed stocks is being driven by cheap money resulting from China's fixed-currency peg.

"The recycling of this [fixed-exchange] money is an integral part of the arbitrage opportunity that is driving the private equity boom," says the OECD report.

"Easily the main contribution to the measure of global liquidity in 2006 is Chinese foreign exchange market intervention."

(For the full story on China's role in global liquidity, keep reading here...)

Meantime in London, investors were told by a leading commodity fund manager that they'd be "crazy" not to hold real assets in their portfolio right now.

"It's absurd to imagine that with the enormous amount of infrastructure going on, whether that be railroads or roads or power stations or subways or airports, this is other than a revolution in terms of demand," said Ian Henderson, fund manager of J.P.Morgan's Natural Resources Fund, in a Reuters interview.

His fund holds one-third of its money in base metals and related stocks, with energy accounting for one quarter. Allocation is currently weighted 27.5% to gold and precious metals investments.

"For mineral producers," Henderson went on, "the current situation with the arrival of China, India and other emerging markets as major commodity consumers sitting down to the table can be likened to a hostess having prepared a dinner for eight having a further eight guests arrive for whom no food has been bought or prepared."

If you'd like to book your seat at the table today – and own physical gold bullion outright in your name – visit www.BullionVault.com now.

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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