Gold News

Gold Support "at $880" as Volatility Spooks Indian Buyers, Western Stock Markets Ignore Worsening Data

The Gold Price held inside a $9 range during London trade Wednesday morning, holding steady for US investors even as the Dollar rose against the European single currency.

World stock markets rose and crude oil pushed above $41 per barrel.

US Treasuries also gained, erasing this week's losses so far and pushing yields on the 10-year back down to 2.83%.

New data showed private-sector US payrolls shrinking by 522,000 in January. Official job-loss figures are due Friday.

Thursday will bring widely-expected interest-rate cuts from the Bank of England and European Central Bank (ECB).

"Gold tested the upside during London hours yesterday," says today's note from Mitsui, the London metals dealer, "but it only saw liquidation once New York came in.

"Support was found at $890. The major technical support lies at $880 and it seems physical support should also pick up at this level."

Indian gold consumers – source of one-fifth of physical gold demand each year – "are expecting prices to come down to $800-835 so that they can buy," according to one Mumbai dealer.

Meantime, "There are no enquiries from jewelers. Volatility is keeping them away."

Rising today back above 14,000 Rupees per 10 grams, however, "a healthy correction has taken place" in local Gold Prices in India, adds a technical analyst, also speaking to Reuters.

"It has made the uptrend more secure."

Volatility continued to hit currency traders early Wednesday, meantime, knocking 2¢ off the Euro to $1.2820 and also driving the US Dollar above €89.20.

The Gold Price in Euros rose back above €700 an ounce – a near-4% discount to Monday's new record highs.

For UK investors now looking to Buy Gold, the price held just above £620 – more than 6% down from last month's all-time high.

Versus the Swiss Franc – formerly seen as the world's safest, most cautiously-run major currency – the price of gold has now risen 37% from its October low, reaching new all-time highs above CHF 1,080 per ounce on Monday.

Early Wednesday, the Gold Price in Swiss Francs traded 5% below that record level.

"Gold is a barometer for fear on the markets," reckons Commerzbank analyst Eugen Weinberg, speaking to Thomson-Reuters late Tuesday.

"If the equity markets are down, if sentiment is becoming more cautious and people are worried about the health of the financial system, Gold Prices will rise despite the US Dollar."

Today Fitch Ratings downgraded its view of Russia's sovereign government bonds, warning investors that "Russian banks and companies [are] struggling to refinance external debt."

Earlier this week the Kremlin's economic advisor, Arkady Dvorkovich, said Moscow is considering "new tools" to staunch the flow of capital out of Russia – sparked by the collapse in raw material prices since July last year and driving the Ruble down by one-third so far.

Here in London, finance minister Alistair Darling told a parliamentary committee yesterday that "one or two institutions" may require further tax-funded aid despite UK banks taking emergency loans of £185 billion ($266bn) from the Bank of England since April so far.

Initially launched with a £50bn limit, the special liquidity scheme was intended to run for only 6 months.

New data today showed consumer confidence in the UK sinking to a record low last month, down to a reading of 40 on Nationwide's survey from Dec.'s level of 48 and well below analyst forecasts of 45.

In Australia – where the government of Kevin Rudd, claiming that the "neo-liberal experiment has failed", just took its stimulus spending to 8% of GDP – new building permits issued in Dec. fell by one-third from the same month in 2007.

Service sector activity in the 16-nation Eurozone was weaker than expected last month, the private-sector Markit report said today.

Retail sales fell 1.6% year-on-year over the Christmas period.

French and German equities rose, however – up 1.6% by lunchtime – and Wall Street futures also pointed higher despite consumer bellwethers Kraft Foods, Walt Disney and Time Warner announcing worse-than-forecast fourth-quarter earnings.

Adrian Ash

Adrian Ash, BullionVault Gold News

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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