Gold News

Gold Gives Back 0.5% Rally as Dollar & European Stocks Rise Sharply on US Holiday

Gold Prices gave back an overnight rally of 0.5% early Monday to trade just above $901 per ounce by lunchtime in London.

Wall Street stayed closed for the Presidents Day holiday, meantime, leaving European stocks to race higher while crude oil rose further above $96 per barrel.

The Cac 40 index in Paris gained 1.4% despite news that Jérôme Kerviel – the "rogue trader" who ran up $7.1bn in losses at France's second-largest bank, Société Générale, in January – was previously investigated at the end of Sept.

Here in London, the FTSE All-Share rose 1.8% despite news that Northern Rock – the top five UK mortgage lender supported by the Bank of England since the global banking crisis began last Sept. – will be nationalized after all.

"As the housing market comes back there is every reason to believe there will be a satisfactory conclusion to this," said UK chancellor Alistair Darling at a press conference this morning.

The last UK housing slump took six year to hit rock-bottom. Average home prices have since trebled on average, but they've now dipped 3% from the all-time record peak of Oct. last year.

Longer term, "gold will probably outperform the equities complex," reckons Christoph Eibl of the $1.4bn Tiberius Asset Management funds in Zug, Switzerland.

"People are looking for safe haven investments, for opportunities that are not linked to the economic cycle," he told Bloomberg today.

In the absence of US traders eager to sell it lower today, the US Dollar rose sharply alongside European stocks as domestic forex traders pushed their Euros and British Pounds down to $1.4610 and $1.9470 respectively.

That kept the Gold Price in Euros above €616 per ounce. For British investors wanting to Buy Gold today the price held above £462 per ounce, some 0.8% above last week's low.

"The long weekend in the US would historically point towards a quiet day for the precious metals," says today's note from Mitsui, the precious metals dealer. "But with the recent volatility of these markets anything is possible.

"The range for gold is currently $890 to $920 and we will have to wait for these levels to be tested before the direction of the next big move is clear. The strength of the bull market continues to impress, however, and it would be a surprise to see the next break out as lower."

Gold for delivery in Dec. '08 slipped 0.6% lower at the Tocom futures exchange in Tokyo today, losing ¥20 per gram to ¥3,163. Now equal to $908.93 per ounce, however, the Gold Price in Japanese Yen remains almost one-third higher from last August.

Eighteen of the 31 professional gold analysts interviewed by Bloomberg News at the end of last week remain bullish, the newswire says today, despite being surprised by last week's 2.1% loss.

"We're still pretty comfortable with the Gold Price rising from here," said Mike Curran of Global Mining Research to CNBC on Friday. "A lot of people on Wall Street are looking for $1,000 an ounce."

Francisco Blanch, head of global commodities research at Merrill Lynch, agrees that investors will continue to choose commodities and real assets over stocks and bonds in the near term.

"2008 should be another year of positive returns," he wrote in a report last week. "Strong emerging markets, limited capacity additions and low inventories across most commodity markets [including gold] suggest that prices will stay supported."

Crude oil rose this morning for the fourth day running after Gholamhossein Nozari, the Iranian oil minister, said the Opec oil cartel may cut its output quota when it meets next month to counter the seasonal decline in Western demand.

"Cutting production has been the normal process every year in March," said Nozari in Tehran.

In today's metals market, meantime, iron ore producers in Japan and South Korea agreed with Vale in Brazil – the world's No.1 ore supplier – to raise contract rates by 65% starting in April.

That's the steepest rise in iron ore prices since the 71.5% jump in 2005, according to Bloomberg data.

Copper prices meantime neared a four-month high, while palm oil prices hit a new record in Chinese trade. In Sydney, the Australia & New Zealand Bank said it is opening a commodities trading office in Singapore, hiring up to nine traders to tap into Asia's booming investment demand for raw materials and hard assets.

ANZ's stock this morning lost more than 6% of its value to a two-and-a-half year low after the bank's CEO said 2008 profit-growth will be wiped out by what he called "a bloodbath on the debt markets."

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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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