Gold News

Spot gold slides with stocks & currencies on interest-rate news

Spot gold prices slipped lower again on Thursday, drifting against all currencies as the US Dollar rallied on the foreign exchanges.

Just ahead of the Wall Street open – where stock futures pointed lower in line with depressed equity markets in Europe – gold for immediate delivery traded below $675 per ounce, its lowest level in a week.

Gold priced in Sterling slipped beneath £340 per ounce, even as the Pound dropped on the currency markets.

The Bank of England raised its interest rates by just 0.25% at lunchtime in London. Traders hoping for a half-point hike look unlikely to push the Pound back above $2.00 anytime soon. (Get the full story on Sterling interest rates and gold here...)

Gold priced in Euros also dipped below its key level of €500 per ounce, as the single currency itself dropped beneath $1.3510.

The European Central Bank kept Eurozone rates at 3.75% today in Frankfurt.

"Strong vigilance is of the essence," said ECB chief Jean-Claude Trichet at a press conference afterwards. But "strong vigilance" is at odds with the political pressure now mounting in Spain, Ireland, Italy and France for lower rates to stimulate growth – and keep debt-fueled property markets buoyant.

Back in the gold market, "the current bull run would seem to have been put on hold temporarily in the interim," says today's comment from Standard Bank, "[but] the longer term outlook remains relatively intact.

"Expect support to emerge in the $675-$670 band and continued resistance to start from $690, with a close above $695 a strong signal suggesting continued strength into the $700s would be imminent."

In Peru, the Yanacocha mine – the world's largest gold mine, owned by the second-largest gold company, Newmont – reopened yesterday after a strike over local employment.

Newmont expects Yanacocha to produce 1.6 million ounces of gold in 2007.

"We have a very tight market in terms of supply," reckons one analyst. Peru's Energy & Mines Ministry reports that gold production fell 14% in March from the same month last year. (Read more about global gold mining supply here...)

China, on the other hand, grew its gold mining output by 16% in the first 3 months of this year from 2006, said Beijing today.

Yesterday, the China Gold Industry Association announced a large-scale gold discovery in Hunan Province, with 27 tonnes of proven reserves and probably reserves exceeding 50 tonnes.

But will all this gold ever reach the main market? Earlier this year, the South African government increased its gold reserves by buying bullion directly from local producers.

And whilst European central banks continue to sell their national reserves of gold bullion, China may well choose to grow its reserves using a similar strategy.

Get the full story on South Africa's gold buying – and what it might mean for China – here...

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

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