Gold News

Gold "an Excellent Hedge", Silver "About to Break Higher", on Inflation Fears, Debt Monetization & Strong Emerging-World Growth

The Gold Price ticked higher from its second dip to $1120 in two days Thursday lunchtime in London, pushing north for Sterling and Euro buyers as world stock markets held flat.

"The equities markets have been a bit firmer," said one Sydney strategist to Reuters overnight. "That's probably taken a little bit of interest away from gold.

"It appears Gold has once more been influenced by large institutional trading, which has contributed to the recent week's volatility," says a note from Swiss refiner MKS's finance division.

"Gold is turning out to be an excellent 'sideways' trade," says bullion bank Scotia Mocatta. "The [US Dollar] range over the last month has basically stayed between $1088 to $1145 an ounce."

Silver continued to rise against all currencies on Thursday, "within striking distance of the $17.64 March high [and] about to break higher" in the view of Scotia Mocatta's technical analysts.

In the forex market, the Dollar re-touched yesterday's 1-week high vs. the Euro after a senior German official announced that "If Greece does need help, it will have to come from the IMF."

"Chancellor [Angela Merkel] has decided that any other solution would be legally and constitutionally impossible," says the Financial Times.

Greek prime minister George Papandreou meantime told European lawmakers in Brussels today that Athens' austerity package – challenged by street protests and two national strikes this month – already match International Monetary Fund requirements.

"We are not going to default...We are saying that we don't need this money."

Falling to $1.3650, the Euro dropped to a fresh 3-week low versus the British Pound at near 89 pence.

The Gold Price for Euro investors rose to a 1-week high of €824 an ounce, up by more than 16% since the Greek budgetary crisis broke in Nov. '09.

Over in the United States, Thursday morning brought mixed economic data to Wall Street, where stocks and bonds both opened the day unchanged.

The Consumer Price Index was flat in Feb. from Jan., rising more slowly than analysts forecast at 1.3% per year excluding food and fuel items.

Continuing Jobless Claims showed a slight fall. The current account deficit for the last 3 months of 2009 was revised to a smaller-than-expected widening.

"Gold will likely be kept firm into 2010 and 2011 by a relatively weak greenback, record-setting US fiscal deficits, rising inflation concerns and higher jewelry demand, which has been hit hard by the recession," reckons Bark Melek, global commodity strategist at BMO, the $373 billion asset manager based in Montreal.

"Gold is an excellent hedge and will remain stable...The end to producer hedging, central bank net buying after a very long pause, and concerns that excessive US and European government debt may lead to future monetization are additional key drivers for the outlook."

Melek is more bullish still on silver, however, noting that new supplies were flat in 2009.

"With demand for industrial silver rebounding sharply in 2010, likely around 19%, as global industrial activity and auto production move into recovery mode, supply/demand fundamentals look set to tighten materially in 2010."

"Gold and Silver prices should, in our view, trend higher over the next few quarters," agrees the latest Commodities Review from French bank Société Générale

"We expect investor buying of gold and silver to continue as inflation fears are likely to increase on strong economic growth in emerging economies and on concerns that developed countries may be tempted to monetize some of their large amount of sovereign debt."

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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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