Gold Prices ticked lower in London on Friday morning, nearing their 11th weekly gain in twelve but dipping to bounce off $828 per ounce as Asian and European stock markets slipped yet again.
"We would not be very surprised if the mild consolidation phase we have been seeing in the past 24 hours continues for a while," says Wolfgang Wrzesniok-Rossbach at Heraeus, the German refining group.
"But we may see stronger consolidation efforts only after the Gold Market reaches a new historic high [above $850] first."
Crude oil prices were little changed as full production came back on-line in the North Sea following a storm. US Treasury bond prices edged higher, pushing the yield offered to new buyers down to a 26-month low.
This week alone, the yield on two-year US Treasuries has dropped 23 basis points to reach 3.43% in early trade Friday. Ten-year yields slipped to 4.25%.
Meantime in the Gold Mining sector, total gold production in South Africa – the world's largest producer nation – fell 6.5% in Sept. from a year earlier according to the government statistics agency.
Annual South African gold output has more than halved in the last decade thanks to soaring costs, falling ore grades and a lack of new discoveries.
This week the world's fourth largest gold firm, Goldfields of South Africa, lost 2,614 ounces of production when up to 7,600 workers at its Kloof mine downed tools to mourn two colleagues killed in an underground explosion.
But junior South African gold-stock Central Rand Gold saw its shares jump 12% on their debut at the London Stock Exchange yesterday. It plans to work deposits abandoned during the 1960s and '70s in the Witswatersrand Basin, using new techniques – and relying on current Gold Prices – to mine at a profit.
Over in the fine art market, the share price of Sotheby (BID:NYSE) dropped 28% on the NYSE Thursday – its biggest ever one-day fall – after its auction of Impressionist art this week raised only two-thirds of pre-sale estimates.
Van Gogh's The Fields and Georges Braque's L'Echo – star lots at the New York auction – received no bids at all. (Might this signal a top in the broader asset markets? Read about Wishful Infeasibility in the Auction Rooms here...)
Back in the metals market, copper prices bounced from a two-month low early today, but platinum futures traded in Tokyo sank to a one-month low, posting their second weekly loss on the trot.
More than half of the world's annual platinum demand comes from auto-catalyst manufacturers, but demand is likely to fall as the US economy slows down – a forecast implied by Ben Bernanke, chairman of the Federal Reserve, on Thursday.
"We have a perfect storm of negative factors affecting the US consumer right now," says David Jones at DMJ Advisors in Denver, Colorado. "We have higher energy prices, declining home prices and a crisis-related tightening of credit."
US consumer confidence has now sunk to the worst levels since Hurricane Katrina hit New Orleans in 2005 according to the RBC Cash Index today, plunging to a reading of 64 from last month's level of 80.6.
"Gold will be very solid as US interest rate prospects are likely to pressure the Dollar," reckons Tatsuo Kageyama at Kanetsu Asset Management in Tokyo, speaking to Reuters.
"Gold is overbought now and profit-taking pressure should grow, but funds will flow into gold because it has been performing extremely well. You really can't get this kind of return by buying stocks or other financial instruments."
Japan's Nikkei index sank to a three-month low today, dropping 1.2% for the session on rumors that Mizuho Securities may post losses worth almost $900 billion on its subprime-mortgage trading.
On the currency markets the Yen shot to an 17-month high vs. the Dollar overnight, pushing the greenback below ¥111 for the first time since June 2006.
The US Dollar also fell vs. the European single currency, sending the Euro to a new lifetime high above $1.4750.
That helped keep the Gold Price in Euros in a €2 range either side of €566 per ounce, but the price in British Pounds held steady – remaining above £394 per ounce – after data showed the UK's trade deficit widening to £7.8 billion in Sept. ($16.3bn).
Out-pacing analyst forecasts by more than 10%, this record deficit was driven by non-EU imports of cars and consumer goods. The UK Conference Board’s index of leading indicators, meantime, decreased by 0.1% in Sept. – its third consecutive monthly drop.
Over in India, meantime, the Economic Times reports from Mumbai that, "a day ahead of Diwali, considered to be the biggest money-spinner for Indian gold traders, the cash counters are not ticking in line with expectations."
Gold which is viewed as an auspicious gift and purchase during Diwali, the Hindu festival of lights. But trading at a 17-month high vs. the Rupee, gold is failing to repeat the sharp growth in demand it saw last autumn.
"The price is still high, so we have cut on quantity," said one housewife in Vashi to the newspaper. Demand may have slipped 25% by volume from Diwali 2006, it adds – but prices for Indian consumers wanting to Buy Gold have risen by more than 12% since then.
Last year's Diwali festival saw physical demand double from 2005 according to the Bombay Bullion Association, as jewelry buyers took advantage of the pullback in Gold Prices from last May's all-time top.