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Dollar Gold Slips, Silver Loses 2.5% as World Equities Fall, ECB Buys Portugal Debt, UK Rates "On Hold" for Post-1930s Record

The Dollar Gold Price slipped to two-day lows – and silver shed 2.5% – on Thursday morning in what wholesale dealers called "uninteresting" and "extremely quiet" Asian and London trade.

"London entered [Thursday's trade] a seller of precious metals," says one wholesale trader, "taking silver down through $30 per ounce."

"Risk appetite appears to waning [but] Gold Investment demand...is not forthcoming," says Standard Bank.

World stock markets fell hard on Thursday, with Hong Kong shares losing 2% and London's FTSE100 dropping 0.9% by lunchtime.

Indian stock markets have lost more than $20 million per minute so far in 2011, the Economic Times reports, with billionaire Anil Ambani blaming "vicious and illegal" rumors – spread by "unscrupulous corporate rivals" – for the 19% drop in Reliance Infrastructure Ltd which took his personal loss on Wednesday to $2.6 billion.

"Physical [Gold Bullion] demand, especially in Asia, remains on the sidelines," says Standard Bank.

"Perhaps the lack of interest in China, after the return from [Lunar New Year] holidays, is also contributing to investor unease."

Measured in the Euro, however, physical Gold Prices today recovered half of yesterday's near-1% drop, as the single currency fell hard on the forex market.

Portugal's government debt extended Wednesday's drop – pushing interest-costs to new record highs, and forcing the European Central Bank to intervene with fresh bond purchases – while un-named sources apparently confirmed that German "inflation hawk" Axel Weber doesn't want to succeed French policy-maker Jean-Claude Trichet as president of the European Central Bank in Oct.

Sterling buyers meantime saw the Gold Price hold flat after the Bank of England kept its key lending rate at a record low 0.5% for the 23rd month in succession – the longest run of "no change" since the Great Depression's policy rate of 2% was maintained from 1932 to 1951.

"We need to make [spending] cuts," said UK government minister Andrew Stunnell to the BBC this morning, because "we're borrowing £400 million a day."

Brent crude oil meantime whipped around $100 per barrel, copper slipped back from new record highs, and wheat futures dropped 1% from Wednesday's two-year highs after Chinese premier Wen Jiabao vowed to spend $2 billion boosting grain production and fighting the winter drought in China – now the world's No.1 producer and consumer of the crop.

"China will probably start to Buy Gold in the near future, but they won't report it for two or three years," said economist David Hale to the Mining Indaba conference in Cape Town today.

Already the world's No.2 gold consumer market, strong purchases by the People's Bank "would be a huge development for the gold market," says Hale, especially if Beijing heeds those advisors recommending 10,000-tonne reserves – greater even than the United States' official stockpile.

"The odds very much favour China making, over five years, very large gold purchases, and this in turn makes me bullish on the Gold Price."

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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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