Gold News

Prices to Buy Gold & Silver Rise as Chinese Imports Surge, Silver Miners "Hedge" Production, Global Inflation Data Eyed

Investors looking to Buy Gold saw the price rise back to last week's highs early in London on Monday, hitting $1364 per ounce even as the US Dollar rose to 1-month highs on the currency market.

European stock markets turned negative, but government bonds and commodity prices were little changed, after China reported a big jump in national imports, led by a 5.7% rise in copper inflows.

"Physical market is still absent," says one Hong Kong gold dealer, citing a "lukewarm" premium and low trading turnover in Asia's bullion markets.

"There is plenty of data out this week," says Standard Bank, "but of particular importance to precious metals will be the inflation numbers" due from China, the US and the UK.

"[China's recent] increase in interest rates is too little too late given the surge in inflation," writes Peking finance professor and Sheyin Wanguo Securities chief strategist Michael Pettis.

"Real estate prices have been on an upward tear, while everything in China that might be considered collectible and capable of holding value – gold, jewelry, premium tea, premium liqueurs, stamps, calligraphy, art, antiques, jade, and so on – has surged in price, in almost every case to record highs."

Monday saw Japan's full-year 2010 economic data confirm its fall to third place – in Dollar terms – behind China.

With Japanese society as a whole growing ever older, says a report from Goldman Sachs, the national savings rate could fall from 5% of income in 2009 to possibly negative levels as early as next year.

Copper, zinc and aluminum futures will start trading on the Singapore Exchange from Tuesday, under a deal with the London Metal Exchange.

World No.1 aluminum producer United Co. Rusal believes that a physically-backed exchange-traded trust for investors to track the metal's price will be launched within "weeks" according to its deputy CEO Oleg Mukhamedshin.

"Since the start of the year, [Silver Investment in US futures] has dropped...6% while the ETF position has dropped 3.9%," says the latest Metal Matters from bullion bank Scotia Mocatta, "[which] might just reflect some repositioning by investors as they adjust their portfolios."

London trade saw the Silver Price rise back above a three-decade high of $30 per ounce for the fourth time in the last 3 months.

Noting "strong buying" from coin investors and product-fabricators, however, Scotia attributes the current "backwardation" in Silver Prices – where future deliveries, unusually, are now cheaper than immediate supply – to "a combination of commercial bank borrowing and by [mining] producer-related forward hedging business."

Five un-named silver mining companies apparently sold forward a large chunk of their future production to "lock in" current prices, the Financial Times reported last week.

Needing to borrow physical Silver Bullion, these miners have helped create the recent supply shortages, suggests Scotia, in London – heart of the world's wholesale precious metals market.

Silver imports to China rose four-fold in 2010. The recent Lunar New Years celebrations also saw heavy shipping of metal to the Far East, according to senior logistics executives in Europe.

Buying Silver or physical Gold Bullion today...?

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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