Gold News

Gold Dips as Volatility Widens; Oil Rallies & Tokyo Stocks Hit 26-Month Low

Spot Gold Prices fell $6 from an overnight rally to $911 per ounce just before the London open on Tuesday, continuing the wide volatility seen late Monday as Asian stocks fell and the US Dollar held at 7-week lows vs. the Euro and Japanese Yen.

Japan's Nikkei fell 1 percent, finishing below 14,000 for the first time since November 2005 after Bank of Japan chief Toshihiko Fukui said Japan's economic growth will "slow for some time."

The US Dollar held near to Monday's seven-week lows vs. both the Japanese Yen and the Euro ahead of  on Tuesday on concern that weak U.S. bank earnings will push the economy closer to recession, fuelling expectations for more Federal Reserve interest rate cuts.

Citigroup is set to cut its dividend when it reports fourth-quarter results in New York later today, says the Wall Street Journal, plus $10 billion or more of new capital raising and write-downs costing up to $20bn.

The Nikkei stock index in Tokyo lost 1% this morning to close below 14,000 for the first time since Nov. 2005. Tocom gold futures traded for delivery in Dec. '08 slipped ¥4 per gram to ¥3,164, equivalent to $914.75 per ounce.

The British Pound remained at nine-month lows beneath $1.9600, meantime, after Tesco – the UK's largest retailer – disappointed the City with a mere 3.1% growth in Christmas sales.

Tesco shares lost 2.5% at the open, helping drag the FTSE100 almost 0.5% lower.

Today brings consumer-price inflation for the UK after it reported the fastest factory-gate inflation since 1992 on Tuesday. The Gold Price in British Pounds briefly dipped below £463 per ounce just as London opened today.

US traders will be awaiting retail sales data for Dec., expected to show zero growth after Sears told Wall Street its Christmas sales fell 3.5% and fourth-quarter profits could halve from 2006.

US producer price inflation for Dec. is also due for release at 08:30 EST. It's expected to show an increase from Nov.'s 34-year record.

Crude oil today added to Monday's $1.50 jump, rising to $94.25 per barrel of West Texas Intermediate after US president Bush called on Arab states in the Gulf to confront Iran over its support for militant groups.

Royal Dutch Shell declared "force majeure" to escape legal action over late shipments of crude oil from its 380,000-barrel per day Forcados field in Nigeria. Two pipelines at the terminal were hit by sabotage last week.

Forcados had been shut since militant attacks in Feb. '06.

Meantime in the gold mining sector – where mergers & acquisitions were virtually shut-down by the global credit crunch starting last August – AngloGold Ashanti agreed on Monday to buy US-producer Golden Cycle Gold for $149 million in stock.

The world's third largest gold mining company, AngloGold is paying a 37% premium to Golden Cycle shareholders according to MiningWeekly's maths. The target's main asset is a minority interest in the Cripple Creek & Victor joint-venture in Colorado.

AngloGold Ashanti already holds 67% of the site plus 100% of the production. Cripple Creek & Victor produced 283,000 ounces of gold during 2006 – around 5% of AngloGold's annual output.

In Toronto, Canada, meantime, Yamana Gold raised its 2008 production target by 12% to 1.35 million ounces after completing the purchase of both Meridian Gold and Northern Orion Resources in 2007.

Outside the stock market, however, news of fresh gold discoveries remains thin, with Canadian gold miner NovaGold – whose shares halved in value late last year after it shelved plans to develop the Galore Creek project with Teck Cominco – finally overcoming legal challenges to production at its Rock Creek mine (now scheduled for sometime before April).

Novagold also hopes to complete a feasibility study – and begin the application for mining permits – at Donlin Creek, also in Alaska, before the end of this year.

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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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