Gold News

Gold Price Regains $1400, "Support Level Strengthened" as Japan Disaster Hits Stocks & Uranium, East European Bond Auctions Fail

The Gold Price ticked higher in London trade on Wednesday, holding above yesterday's 4-week lows to reach $1400 per ounce, as a rally in Japanese shares failed to prevent further losses in global stock markets.

A jump in radiation levels forced technicians to abandon work at the stricken Fukushima nuclear plant 150 miles from Tokyo, where Russia today joined France in moving to evacuate embassy staff.

Long-dated government bonds from the major developed economies rose further, but debt auctions by Russia and Poland both failed to raise more than  50% of the money sought.

Silver Prices tracked gold's recovery, briefly touching $34.80 per ounce – a new 31-year high when first reached a fortnight ago.

"We saw very good buying below $1390 from the physical market" says Swiss refiner MKS's finance division  in a note on Tuesday's 3.1% drop in the Gold Price.

"It would appear that investors consider yesterday's sell-off as overdone," agrees South Africa's Standard Bank.

Now "cautiously re-entering the precious metals market," this Gold Investing – "together with a weaker Dollar and some interest from the physical market, could see some upside for gold and silver."

Crude oil prices meantime rallied fast as forces in Saudi-neighbor Bahrain opened fire on pro-democracy protesters, and pro-Gaddafi forces in Libya attacked the rebel-held stronghold of Benghazi.

The Bank of Japan again pumped cash into Tokyo's money market, taking the 3-day total above $700 billion, while in a rare televised appearance, Japanese emperor Akihito said he is "deeply worried" by the country's nuclear crisis.

Uranium prices have dropped nearly 10% over the last week. World No.2 mining producer Cameco – already down 15% from Feb.'s 27-month peak – has shed another 14%.

Japan is the world's third largest nuclear power generator. World No.2 France today called for an emergency G7 finance teleconference to discuss "systemic risk".

"[The crisis] is affecting how people in the US are thinking about their fledgling nuclear expansion," says Doug Davis at the $425 million Toronto money manager Davis- Rea Ltd., speaking to the Wall Street Journal.

"Who are you going to sell your uranium to if the Americans don’t expand nuclear power plants and the Japanese don't need it for a while?"

Over in the Gold Mining sector on Wednesday, a number of smaller producers reported  sharply higher operating margins for the end of 2010, thanks to "higher realized prices" as the metal broke then-all-time highs above $1400 per ounce in Nov. and Dec.

"This is a bubble and a fear trade," reckons Yogi Dewan, CEO of $640 million family-office asset manager Hassium in London, speaking to CNBC today.

"As soon as the recovery takes hold and the interest-rate cycle changes you will see mass outflows from gold into riskier assets."

A raft of new US data today defied analyst forecasts with a surprise outflow of $113 billion on the nation's fourth-quarter Current Account, plus fewer-than-expected new housing starts and building permits.

Raw material costs for US factories 1.6% last month from Jan., the fastest month-on-month pace since the post-deflation rebound of 2009.

"The problem [with the Gold Price rally] is I think it may be well sold into," says a London trader quoted by Dow Jones Newswires.

"Serious damage was done [to gold's technical picture on Tuesday] and although longer term, we are still in a bull market, short-term the uptrend is broken."

"Silver also had a technically bearish day," says Russell Browne at bullion market-maker Scotia Mocatta, "however the chart continues to be more encouraging than gold's.

Support for the Silver Price now "lies at late February congestion of $32.15," says Scotia. In gold, yesterday's drop "only found [support] at the 100-day moving average of $1379.

But "after [that] test, this level has strengthened and gold will now require a significant catalyst to break below here."

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Adrian Ash

Adrian Ash, BullionVault Gold News

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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