Gold News

Gold Price Hits New Record, Silver Investment "Goes Nuts" But "Not Stretched" Just 1 Week Off All-Time 1980 High

Dollar Gold Prices rose at the start of Asian trade on Monday, touching new all-time highs above $1476 per ounce before easing 0.4% as world stock markets held flat and European crude oil slipped back to $125 per barrel.

But "Gold and [platinum-group metals] were irrelevant," according to one Asian dealer, as "The silver market went nuts," with "swift buying" pushing spot silver prices to a fresh 31-year high above $42 per ounce.

Broad raw material prices also pushed higher, taking the GSCI index of 24 investable commodities to the highest level since July 2008.

Back at its peak in 1980, Silver Bullion was more expensive for just one week – 15th to 21st Jan.

Over the following month it dropped more than one third from its record London Fix of $49.45 per ounce.

Falling below $20 per ounce in Dec. 1980, the Silver Price then took 27 years to touch that level again.

Silver Investment "is still claiming the most interest among the precious metals," says Standard Bank's weekly review of US futures trading, commenting on last week's 8.2% price rise.

"Despite growing speculative activity, the silver market is not too stretched," Standard Bank concludes, pointing to how investors' bullish bets – net of that group's bearish bets – now account for 19.5% of all open contracts on the US silver futures market.

"This [net long position] is well below the average level seen in 2010 [of] 23%."

Also reviewing US watchdog the CFTC's latest Commitment of Traders report, "It is odd that with the Gold Price now above $1470 per ounce, total net longs still languish more than 4 Moz [124 tonnes] off the record high set in...October 2009," says the latest Precious Metals Weekly for ABN Amro published by the VM Group consultancy.

The price of gold 18 months ago was $400 per ounce lower, notes VM. So in the absence of strong Gold Investment via exchange-traded trust funds – now standing at the lowest level since June 2010 on VM's archived data – "this implies that [London dealing] and physical trade has been very supportive to the Gold Price," it reckons.

"A $50-100 per ounce move upward in the gold price can be expected," it concludes, if US Gold Futures traders push the speculative Net Long position back towards its 2009 record.
 
Over in Japan meantime on Monday – where the number of open Tokyo Gold Futures contracts fell last week to a near 16-month low – a mid-sized earthquake coincided with 1-month remembrances for the 28,000 people missing or killed after March's quake and tsunami.

The Yen rose sharply, knocking the Gold Price for Japanese buyers 1.1% off a new 28-year high, and the Japanese stock market fell. A senior official with the International Monetary Fund – due to report its new 2011 economic forecasts today – was quoted by Bloomberg saying both Japanese and US growth has been sharply downgraded.

Car giant Toyota today announced a series of one-day shutdowns at its North American factories owing to a lack of components from Japan.

World nos. 1 and 3 respectively by annual GDP, both the US and Japan "lack credibility" in their government deficit reduction plans, the IMF official said.

Politicians in Washington "only deferred" a possible shutdown of government services, according to one analyst, by agreeing stop-gap budget cuts late Friday of $38 billion for the year-ending Sept. 30.

Monday saw US and other major government bond prices fall, nudging interest rates higher.

Like other "peripheral" European debt prices, however, Portuguese bonds ticked higher, pulling10-year interest rates for Lisbon back down from last week's record Euro-era peak of 8.80%.

On the currency markets, both the Euro and Sterling held near last week's new 2011 highs at $1.448 and $1.642 respectively.

That capped the price for European savers wanting to Buy Gold today, with the Gold Price in Euros unchanged at €32,750 per kilo.

The Gold Price in Sterling edged back from Friday's finish of £900 per ounce – the highest weekly close of 2011 so far.

Buying Silver or physical Gold Bullion today...?

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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