Gold News

Gold rises $5 to new 10-day high despite lack of physical demand

Spot gold prices continued Thursday's rally early Friday, opening London above $663 per ounce and then rising above $665 as the Wall Street open drew near.

Gold priced in Pounds Sterling broke £336, a new 10-day high.

Priced versus the Euro gold hit €495 per ounce.

"The fact gold has managed to stay above $650 an ounce has given some confidence to the spot gold market," reckons David Moore, a strategist at Commonwealth Bank of Australia in Sydney.

"One of the reasons that might prevent a break of the $650 level could be an increase in physical demand. So far however that hope hasn't materialized," says Wolfgang Wrzesniok in today's weekly metals report for Heraeus, the German refining group.

"Our colleagues in Hong Kong report that despite the already lower prices, buying interest is still fairly muted."

A lack of demand is to be expected in India right now. The world's No.1 destination for physical gold just ended the traditional spring wedding season.

That's why gold's upward move in June "may not be all that great, because the physical market is in its lean season," said an analyst from IL&FS InvestSmart in Mumbai to the Economic Times earlier.

Even so, Indian investors raised their open interest in Mumbai's August gold contract by 0.8% overnight, taking the total to 9,504 lots.

"Looking forward it could potentially be a volatile period for gold," says Moore at Commonwealth Bank, "depending upon how the Dollar reacts to data releases in the US, particularly tonight."

The much-watched non-farm payroll numbers are due out at lunchtime in Washington.

This week's numbers so far paint a very mixed picture for the future of US economic growth – weighed down by the slump in real estate but also facing fast-rising inflationary pressures.

What might it mean for US interest rates, the Dollar, and – by extension – the price of gold? Click here to read more 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.

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