Gold News

Gold Dips from One-Week High as Oil Bounces, Stocks Gain; Commodity Bull in "Early Stages"

Gold Prices slipped back from a one-week high of $806.50 as the London opening drew near on Wednesday, dipping below $801 per ounce – more than 1.6% above yesterday's start – as Europe's stock markets opened the day sharply higher.

"After recovering to the $800 mark, the Gold Market is now waiting for direction from the currency and oil markets," reckons Shuji Sugata, head of research Mitsubishi Futures in Tokyo.

"There are several important events in coming days,'' said

Crude oil futures bounced on news that the Opec oil cartel will not raise output quotas at its meeting in Abu Dhabi today, taking Brent back above $90 per barrel.

Tokyo gold futures for Oct. delivery shot more than 2% higher as the Nikkei stock index ended the session 0.8% to the good. Here in London the FTSE100 index gapped up 0.9% at the open, and the Dax in Frankfurt rose 0.5%.

On the currency markets, the Euro fell to $1.4700 at the start of Frankfurt trade, keeping the single currency in the downtrend it began at $1.4966, its record high of late Nov.

The US Dollar also gained today against the Japanese Yen, rising 0.8% overnight to ¥110.60.

News that consumer confidence in the United Kingdom, meantime, slumped 12% on the Nationwide's measure to a ten-month low in November added to this week's pressure on Sterling.

The Pound continued Tuesday's drop vs. the Dollar, Euro and Yen – led by a warning from the City's watchdog that mortgage lenders face a "very difficult" market in 2008 as 1.4 million home-loans adjust to higher repayments.

A leaked document showing Treasury plans to nationalize Northern Rock – the over-geared mortgage lender that suffered Britain's first banking run by panicked depositors in nearly 130 years this summer – only dented the Pound further, pushing the Gold Price in Sterling above £392 per ounce.

More than 2.6% higher from yesterday's London start, even as the Dollar price of gold slipped, bullion for British investors wanting to Buy Gold Today remains 3% off its all-time record high of late Nov.

"Our view is that the commodity bull market is still very much in its early stages," said Kevin Norrish of Barclays Capital to reporters in New York yesterday when he launched the bank's 2008 outlook.

Putting crude oil above $100 and eyeing a 10% gain in copper prices, Norrish believes Gold Prices will average $830 per ounce next year, more than one-fifth above the average price in 2007 to date.

"The gain, which tops the $755 average 15 analysts surveyed by Bloomberg," the newswire reports, "will be aided by declining production from mines in South Africa and rising inflation, which attracts investors seeking a haven, Barclays said."

Institutional investors continue to deny the rising cost of living worldwide, however. US interest-rate futures now put an even-odds chance on a 0.5% cut when the Fed meets next Tuesday.

This time last week the odds were 50-to-one.

Citigroup's chief economist, who previously worked at the Federal Reserve, said on Monday that he thinks the US central bank will cut its key lending rate by 1.0% by June to defend the housing market.

Meantime in Shanghai this morning copper futures rose alongside zinc and aluminum as China Construction Bank, the country's biggest mortgage lender, looked to sell 4 billion Yuan ($541m) of residential mortgage-backed securities.

China's CNPC Research Institute of Economics and Technology said today that the nation's oil demand will rise 4.5% every year until 2015. Kerosene demand may double to 23.3 million tons.

Saudi Aramco, the giant mid-east supplier, today raised its prices to Asian buyers by $1.30 a barrel. US buyers face an increase of $3.10 to $4.70 per barrel.

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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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