Gold News

Gold & Silver Slip, But Indian and Gold Investment Demand Rising; "Narrative Changes" at All-Time Record High Prices

Gold fell back from its second attempt to breach $1146 per ounce in two days on Wednesday lunchtime in London, slipping 0.5% as European stock markets dropped almost 1%.

Crude oil and broader commodity prices held flat, as did government bonds.

Silver Prices briefly rose above $18 an ounce, before slipping 1.5%.

"BOJ deputy governor: signs Japan exiting deflation," says a Reuters headline.

"Bank of England MPC minutes hint at inflation worries," says the BBC online.

Over in India, "We are not getting stocks," said one bullion-bank dealer to Reuters earlier, despite European airports re-opening after Iceland's volcanic dust cloud moved on.

Amid the current wedding season and ahead of next month's auspicious gold-buying festival of Akshaya Tritiya, "This is supporting prices," he said.

Forecasting little change in Gold Prices by this autumn's festival season in India – the world's No.1 private consumer market – "The central bank will not miss Buying Gold on dips," reckons Gnanasekar Thiagarajan, head of research at Commtrendz in Mumbai.

"In fact, China has been waiting to increase its reserve in gold."

The People's Bank of China reported adding 75% to its Gold Bullion reserves between 2002 and 2009, taking it to 5th place in the world league of official holders.

Last November, the Reserve Bank of India bought 200 tonnes of gold from the International Monetary Fund (IMF), taking it to 10th position.

A new IMF report today called for a global banking tax, raising money for a "bail out" fund to rescue the industry from "a future – and inevitably global – financial crisis."

Wall Street giant Goldman Sachs – which yesterday reported record quarterly earnings at its fixed-income division – rejected US government claims that it misled foreign investors in sub-prime mortgage investments it created in 2007.

Paulson & Co., the New York hedge fund that made $1 billion betting against the mortgage derivatives which Goldman Sachs created, said its behavior had been "appropriate and conducted in good faith" in a letter sent to investors, quoted by Bloomberg.

The letter follows a conference call late Monday with 100 investors, the Wall Street Journal reports, reassuring clients about the hedge fund's involvement in the case.

"It's not a rush for the doors," said one investor to Bloomberg.

Gold Prices lost almost 3% from Friday's high to Monday's low, after news broke that Paulson & Co. – the largest single holder of SPDR Gold Trust stock, the world's largest Gold ETF – was named but not accused in the US government's charges against Goldman Sachs.

The SPDR Gold ETF trust closed Tuesday holding a record 1141 tonnes of bullion, unchanged for six sessions running.

"Which currency gives us the best indication of gold's real strength?" asks the latest Metals Monthly from London's VM Group consultancy, published for Fortis Netherlands.

"If we use the IMF's Special Drawing Right, or SDR" – a notional currency launched to replace Gold Bullion in central-bank reserves in the late 1960s – "we find gold hit an all-time high of 762.48 SDR per ounce on 12th April, 1% higher than in early December.

"[This] clearly changes the narrative," says VM, with Gold Prices standing "at an all-time high."

Physical demand has been weaker than forecast, the report goes on, but it "picking up" in key markets led by India. But the market is "back in thrall to Gold Investment demand," says the consultancy, noting six weeks of positive inflows to the 17 physically-backed ETFs it tracks.

Priced in the European Euro today, the Gold Price rose to a 3-session high of €27,445 per kilo, erasing almost all of Friday's drop.

UK investors wanting to Buy Gold on news that average earnings growth lagged inflation yet again in March saw the price drop back below £740 an ounce, unchanged from last week's finish as the Pound rose on the currency markets.

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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