The gold market continued to climb on Thursday, hitting $648 just ahead of the Wall Street open – a gain of more than 1% from the low hit on Monday.
Gold priced in Dollars then dipped as news broke that US first-quarter growth was the weakest in four years. The US Federal Reserve's favored measure of inflation, however, rose faster than forecast at 2.4%.
The Fed is due to announce its latest decision on US interest rates at 14:15 EST today.
A resurgent Pound tempered Thursday's move in bullion for British investors wanting to buy gold today. Sterling rose back above $2.00 versus the Dollar to a two-month high on the currency markets. That capped the Sterling price of gold at £323.22 per ounce.
The gold price in Euros also climbed 0.8% higher from Monday's low, spiking above €480 per ounce as the single currency held at $1.3453 against the Dollar.
"A level close to the March low has been providing a good gold buying opportunity," said Akio Fukushima at Okachi & Co. in Tokyo to Reuters earlier. "The recent sell-off in gold resembled the one in February, when investors hurried to lock in profits from gold, resulting in a much steeper fall in the gold price.
"But that was also reversed by bargain-hunting."
John Reade at UBS – Europe's largest bank – was more emphatic still. Speaking to the Financial Times, he said that if gold prices remain below the 200-day moving average (currently $642), then any further short-selling may push gold down towards $630-$620 per ounce.
"If so, this could present the ‘table banging’ buying opportunity we have been waiting for. Those that want to buy decent amounts of gold should start soon."
Gold's overnight gains came as the White House said it was "deeply troubled" by North Korea test-firing short-range missiles. US crude oil prices held above $70 per barrel after a surprise drop in US gasoline inventories reported Wednesday.
Global stock markets, meantime, capped three days of losses. The Nikkei in Tokyo closed Thursday 0.5% higher. Tokyo gold futures also gained, adding 0.7% to the price of gold promised for delivery in April '08.
"If anybody wanted to square their positions in the gold market, they would have done so by now," reckons Ron Cameron, an analyst at Ord Minnett in Sydney
Speaking of today's interest-rate decision from the US Federal Reserve – due at 19:15 GMT – "any wording on growth, particularly on inflation, will have an impact on the Dollar and therefore gold prices," he told Bloomberg.
The ongoing collapse of the subprime mortgage market – where 13% of outstanding loans are now in or near default according to the Wall Street Journal – will weigh heavily on today's decision. Today's Financial Times warns that "Credit derivative fears continue to gain pace" as the ongoing trouble at Bear Stearns – Wall Street's third-largest securities firm – threatens a serious default in the market for bonds backed by US mortgage loans.
Wednesday also saw KKR and Clayton, Dubilier & Rice, two leading US private equity firms, pull a key debt offering to finance their most recent takeover. They were planning to raise $1.55 billion in bonds to pay for a leveraged buy-out. But they found the liquidity drain blocked on Wall Street. That left the deal's underwriters to stump up a quick bridging loan.
On the other side of the Fed's ledger, however, Ben Bernanke and his team may remain concerned about "elevated" inflationary pressures. Caught between a rock and a hard place, in short – between rising inflation but a looming credit collapse – the Fed could begin slashing its interest rates within the next six months, says Bill Gross, head of Pimco, the world's largest bond manager.
A cut in the real rate of interest paid by the Dollar would likely force a fresh wave of investment cash into gold. As John Reade at UBS advises, "those that want to buy decent amounts of gold should start soon." To buy physical gold bullion at live spot prices now, click through to BullionVault...