Gold News

Gold Price Hits New Dollar Record But "No Sticker Shock Yet" in Quiet, Low Volatility, "Relatively Small" Boom

Gold Prices pushed on to new record highs against the Dollar early Wednesday in London, breaching $1313 an ounce as the US currency fell to new 5-month lows vs. the Euro and Western stock markets fell amid street protests and a national strike in Spain.

"Gold punches above its weight in terms of significance," said Jeremy East of Standard Chartered Bank at the London Bullion Market Association's conference in Berlin on Tuesday.

"What looks like a massive boom in demand is actually very small...relatively insignificant" compared with the size of other financial markets.

"There's no sticker shock yet," agreed Steve Branton-Speak of Goldman Sachs, speaking on the same panel and confirming the "lack of frantic activity or volume" noted by Gerry Schubert of ABN Amro.

"When the Gold Price broke new all-time highs [in early Sept.]," said Branton-Speak, "volatility was at a 5-year low. When it then went through $1300, traders just shrugged and said 'So, did you watch the game last night?'

"Compare that to the frenzy of Gold Trading we got when Bear Stearns and then Lehman Brothers failed."

The Gold Price in Euros was unchanged early Wednesday as the single currency rose above $1.36 vs. the Dollar, but silver hit new all-time highs for European traders above €16 per ounce.

Silver Prices also jumped to new 30-year highs against the Dollar, briefly trading above $22 an ounce.

Asian stock markets meantime rose and copper prices broke 5-month highs at $8,000 per tonne after new data showed Chinese industrial activity rising to its strongest level since April.

European trades unions, in contrast, held protests against "austerity" budgets in Brussels, and called for other countries to join the general strike hitting Spain today - where 80% of train services were cancelled, garbage went uncollected, and electricity usage in the capital, Madrid, fell by 10% - after the government cut its 2011 spending plans by 8%.

"There's an entire generation of [Western] investors who may not want to trust governments or mainstream financial products," noted Natixis bank's head of precious metals David Gornall yesterday, also speaking at the LBMA's annual conference.

At several points during the global financial crisis to date, "The US Mint has been right at the limit of immediate physical supply...The 2009 recovery in equities was a real test for Gold Prices, but Western demand remained strong," he explained.

"Price dips have been just another opportunity to Buy Gold."

Across in Asia, "People don't need convincing on gold," Gornall went on, noting that 81% of global "bar hoarding" demand comes from Asia, with buying amongst the "traditional buy-side countries" such as India and Thailand - as well as the fast-growing world No.2 for gold demand, China - continuing to grow despite record-high Gold Prices.

Concluding the LBMA conference with his now-traditional summary of the expert presentations given, John Reade - formerly of UBS and now senior vice-president for Paulson Europe - asked delegates to forecast where the Gold Price will be in Sept. 2011, when the Association is scheduled to meet in Montreal, Canada.

"For the first time," said Reade, reviewing the result, "we've got a material uplift in the average forecast from the start of conference" - rising from $1406 per ounce on Monday morning to $1450 at lunchtime Tuesday.

"Perhaps the bears have already gone home." 

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Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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