Gold News

Gold Prices "Set to Rise...Target $1249" as Volatility Hits Stocks, Currencies & Bond Auctions

Gold Prices held near two-week highs for Dollar, Euro and Japanese investors in London trade on Wednesday, creeping 0.1% higher from yesterday morning's AM Gold Fix as world stock markets fell for the 8th time in 11 sessions.

US Treasury bonds eased back but German and UK debt rose again.

Neither crude oil, base metals or Silver Prices were much changed.

"It took 5 days of trying, but [Gold] finally broke above 1218, the 61.8% retracement of the 1249 to 1167 down move," says bullion bank Scotia Mocatta in its latest note, pointing to what technical analysts call a Fibonacci level.

"The break of 1218 opens up the potential for a 100% retracement to 1249."

"Gold should continue to rise, provided that it stays above its two-month support line [now at] 1179.44," says Axel Rudolph at Commerzbank.

Below that, he reckons, stands strong support at the longer-term "2008-2010 uptrend line at 1133.20."

Early in Asian trade on Wednesday, neither Gold nor the currency markets were much moved by news that Japanese prime minister Hatoyama had resigned – a "sideshow", according to GaveKal, the economics consultancy, despite being the fourth resignation in four years.

"What matters is that the Bank of Japan may no longer be sitting on its hands" and is defending the Dollar, says GaveKal – actively selling Yen to suppress its own currency at its "line in the sand" of ¥90.

Actively suppressing its currency against the Euro since March 2009, the Swiss National Bank yesterday saw the Gold Price in Swiss Francs touch a new record high above CHF 46,000 per kilo.

British investors looking to Buy Gold Today saw the price dip to a 5-session low of £828 an ounce, as the Pound leapt on confirmation that the Prudential insurance giant has entirely abandoned its $30 billion bid for AIG's Asian unit, AIA.

"The increase in volatility in the last two weeks is temporary," said Brazil's deputy Treasury secretary Paulo Valle to the Financial Times today.

Brazil on Tuesday cancelled its third bond auction in a month, after the sale of $81 million of fixed-rate debt "basically failed" to find enough bidders.

On the political front Wednesday morning, Israel begun deporting nearly 700 people arrested in its violent attack on a convey of aid ships destined for Gaza early Monday.

Leaders from the G20 group of developed and major-emerging nations meet in Busan, South Korea later this week to address the ongoing turbulence in financial markets.

"[The Eurozone's] divergence in living standards will not be corrected in the absence of federalism and high labor mobility," says economist Patrick Artus at French bank Natixis.

"The likelihood that the Eurozone might adopt a federal structure, with government transfers from high-income regions to lower-income regions, has diminished. [The bail-out mechanisms] established on 10 May 2010 show solidarity in cases of crisis, not a permanent institutionalized solidarity."

A spokesman for the US Mint was reported today confirming that May's sales of American Eagle Gold Coins hit 190,000 unit – the strongest level since the "Millennium Bug" panic of 1999.

New York's SPDR Gold ETF trust fund added 0.3 tonnes Tuesday to its record 1268-tonne holdings, extending the month-on-month increase to 9.4%.

South Africa's Chamber of Mines today reported a 15% drop in first-quarter Gold Mining output.

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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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