Gold News

Gold Bounces, "Safe Haven Money to Buy Dips", as Japan Signals W-Shaped Recession

Gold bounced from a new 3-week low of $1125 in Asian and early London trade on Wednesday, rising back above what several analysts called "key support" at $1138 as the US Dollar ticked down on the currency market.

European equities moved in a tight range, unchanged from nine weeks ago.

The Gold Price for UK and Euro buyers ticked higher from early two-week lows, trading just shy of £700 and €775 respectively by lunchtime in London.

"We could see some people very excited to get back into gold," said Bernard Sin, head of forex and metals dealing at MKS Finance, a division of the Swiss refinery group.

"If you're seeking a safe haven, people will Buy Gold on dips."

Tokyo's finance ministry today slashed its estimate of Japanese economic growth for the third quarter from 4.8% to 1.3% annualized, sparking talk of a "W-shaped" recession.

Mexico, the world's No.6 oil producer, said it has hedged 2010's net oil exports, buying what finance minister Agustín Carstens called "an insurance policy" against crude falling through $57 a barrel.

Heavily invested in Greek government bonds – which were downgraded below A-grade status on Tuesday – the five holding companies owned by Belgium's Fortis Bank were today moved to "negative outlook" by the Fitch ratings agency.

UK chancellor Alistair Darling, speaking to the House of Commons ahead of 2010's General Election, delayed a hike in corporation tax, raised state pension payments, cut duty on bingo players, extended "special support" for both youth and over-50 unemployment, set a 50% tax on banking bonuses above £25,000, and said net public debt as a proportion of GDP won't turn lower until 2015.

Gilt prices rose, pushing one-year government borrowing costs down to 0.54%.

"Activity in the Exchange Traded Gold Funds was cautious during November," notes Darran Grabham in Standard Bank's latest Precious Metals Monthly, "which also illustrates that part of the rally in price was driven by short covering [in the derivatives market].

"Total [global Gold ETF] holdings rose by only 29 tonnes in the month to exceed 1,823 tonnes...substantially better than the very small tonnages added in October."

Tuesday's near-4% drop in the Gold Price saw the SPDR Gold Trust, the world's largest gold ETF, sell almost 14 tonnes of its 1,130-tonne hoard, used to back the value of shares in its trust-fund structure.

Premiums charged on retail Gold Investment products in the United States "keep rising" says Numismaster, following the US Mint's suspension of American Eagle sales.

"The Mint also indefinitely suspended sales of gold Buffaloes last week," notes Patrick Heller, a coin dealer. "You can still purchase one-ounce gold ingots, but are looking at 3-5 weeks delivery time while new pieces are fabricated."

Looking at the gold market's major consuming nations, "Gold has continued to make new record prices," Standard's Grabham goes on, adding that "Investment bar purchasers are becoming used to higher prices, and there is also evidence that new investors – from the 'professional' classes rather than the predominantly agrarian community - are starting to enter the market."

Formerly the world's No.1 private consumer, India will import between 15 ad 20 tonnes of Gold Bullion this month according to the Bombay Bullion Association – sharply higher from Dec. 2008 and equal to 2007 levels.

"People in the Middle East will continue to buy jewelry" despite the Dubai debt crisis, says boutique jeweler Alisa Moussaieff.

"[Dubai's debt freeze] might cause a temporary cautiousness," she told Jewellery Outlook in a London interview, but gold "is in their blood. It's in their tradition."

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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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