Gold News

Gold Price Rallies to $1700 from "Dollar-Driven Slump", France Urges "ECB Intervention" as Portugal Downgraded to Junk

The Gold Price crept higher to $1700 per ounce for the fourth time in 3 days in London on Thursday morning, recovering the last of this week's earlier losses in Sterling and Euros in what dealers called "quiet" trade.

With New York set to stay shut for Thanksgiving, Japan's Nikkei index fell to its lowest level since April 2009, but European stock markets bounced hard from this week's 6% drop.

Germany's Dax index remained 10% lower from the start of November, however. Thursday lunchtime saw the Gold Price in Euros trade 2.2% higher for the month-to-date.

"There is urgency. We will talk about [ECB intervention] today in Strasbourg," said French foreign minister Alain Juppé to France Inter radio this morning, ahead of a meeting between French and Italian prime ministers Nicholas Sarkozy and German chancellor Angela Merkel.

"We do not want Eurobonds, because we do not want German interest rates to rise dramatically," Germany's minister for economic affairs Philipp Rösler in a speech to the Bundestag this morning.

Following Wednesday's poor auction of new German debt, 10-year German yields today traded above UK gilt yields for the first time in 30 months on the bond market, as 10-year British debt offered new buyers just 2.2% annual return.

Consumer price inflation in the UK slipped from 5.2% per year to 5.0% in October according to official data.

German consumer-price inflation ticked up to 2.9%.

"[This week's] slump in the Gold Price is mainly US Dollar-driven," says a note from analysts at Commerzbank in Luxembourg.

"Gold calculated in Euros has been able to rise."

"For now," says the latest technical analysis of the Dollar Gold Price from Scotia Mocatta in New York, "we continue to hold onto our medium-term bullish outlook."

"Immediate upside targets are the 55-day moving average at 1723.82 and the 1753.07 October peak."

Back in Europe on Thursday, the Irish government asked its political-union partners to share the cost of its €63 billion ($84bn) banking bail-out of late 2008, saying that Ireland has "borne a disproportionate share of protecting the European banking system.

"Where you have reckless borrowing you have reckless lending," said finance minister Michael Noonan.

Last week Noonan expressed "disappointment" that details of Ireland's 2012 budget had been sent to the German Bundestag six weeks before Dublin's parliament will see them, to comply with German laws regarding spending such as Berlin's share of the €85bn bail-out of the Irish state.

Portugal's credit status was today downgraded to "junk" by the Fitch ratings agency, as a general strike over Lisbon's budget cuts closed public services and transport.

Moody's warned on US debt, saying that if Congress reduces the size of budget cuts for 2012, it "could have negative rating implications", while Standard & Poor's Tokyo director said Japan is moving "closer to a downgrade" because its "finances are getting worse and worse every day, every second."

Citing its latest political turmoil, S&P analysts also cut Egypt's debt rating for the second time in five weeks.

Cairo today paid a record 14.4% on 6-month loans totaling $362 million – barely half the sum it had sought from investors.

Crude oil prices meantime pushed higher from a two-week low, but agricultural commodities fell sharply.

Base metals rallied from a 5-week low, led by copper after Barclays Capital raised its 2011 deficit forecast by 10% to 536,000 tonnes, matching the demand-supply gap estimated Tuesday by BofA Merrill Lynch.

The Indonesia Tin Association today asked exporting giant PT Timah to suspend all shipments "to support global prices" reports Bloomberg.

Silver Prices today pushed back above $32 per ounce in London trade.

"For any significant move upward in precious metals, we'd need to see the Dollar weaken," says the commodities team at Standard Bank in London.

"[The Gold Price ] has been propped up by physical demand, as buyers see current prices as particularly lucrative, while silver has been riding on gold's coat tails."

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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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