Gold News

Spot gold rises for five sessions running as Dollar sells off

Spot gold retested $663.50 in early US trade on Wednesday, after recovering the day's losses to record a higher price at the PM Fix in London for the fifth session running.

The move came as the US Dollar fell sharply following fresh data from the European Union.

New industrial orders in April rose 8% year-on-year – way ahead of Frankfurt forecasts at 5.9% and almost twice the growth rate of March.

That sent the Euro shooting above $1.3500 after touching a five-week low earlier in the session.

The gold price moved higher versus all currencies, recovering the day's open near £334 per ounce for Sterling investors wanting to buy gold now.

Gold priced in Euros broke back above €491 per ounce.

Adding to the currency market's expectations of higher Eurozone interest rates – and thus a weaker Dollar by comparison – Axel Weber, a member of the European Central Bank, was quoted this morning restating the ECB's "stance of strong vigilance" on inflation.

And in further news from Europe, the European Central Bank confirmed yesterday that two European members of the Central Bank Gold Agreement sold around 17.7 tonnes last week.

That took the CBGA total since March 9th to nearly 120 tonnes. Only 150 tonnes were sold between Sept. and March notes

Over the last 10 weeks the gold market has displayed huge volatility – up from $635 to $692 and then down below $660 today – right alongside these central bank sales.

Several gold pundit believe the record sales by Spain are an attempt to manipulate the gold price; more likely in the short-term, however, is that Madrid is simply trying to raise cash to cover a huge shortfall in the country's balance of trade. (Is the Eurozone now facing break up? Find out here...)

Further pressure on the gold price also comes from India, meantime, where physical demand from jewelers remains light.

"The arrival of fresh stocks forced jewelers to sell a part of their holdings to avoid further losses," reports the Economic Times today.

"Market men said the end of the Indian marriage season has kept physical gold buyers out of the window – and hence lower prices are also failing to lure buyers."

But traders and investors who dare to sell gold or even "go short" right now may come to regret it, says a leading commodities investor.

World-famous author of Adventure Capitalist, Jim Rogers has delivered 250% returns for investors in his global commodity fund since it launched in 1998.

Now Rogers says that gold's recent setback was only to be expected during its long-run bull market.

"Gold rose 600% in the 1970s and then went down nearly every month for two years," he tells an interviewer from Financial News.

"Most people gave up – but then it went up another 850%. That’s what happens in bull markets."

Want the big picture for gold's 2007 outlook today? Keep reading 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.

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