Gold News

Spot gold rises after Asian stocks catch-up with UK and US sell-off

Spot gold prices moved within a tight $2 range during the first-half of London trade Thursday.

After recovering yesterday's dip during the Asian session, investors wanting to buy gold today found it priced just above $670 per ounce at the Morning Fix.

For British investors gold recovered £337 per ounce as the Pound fell on the currency markets ahead of today's interest rate decision from the Bank of England.

Versus the Euro gold prices briefly broke above €498 per ounce. Just as with the Sterling price of gold, that put the metal less than 0.5% off last Friday's two-week closing high.

Even so, "gold is likely to extend its period of consolidation," reckons today's technical analysis of gold from Standard Bank.

"Although falling steadily for the past few sessions, support at $665 and the 100-day moving average has been proven once to hold up the market, and this should likely continue."

In Tokyo overnight, gold futures contracts for delivery in April '08 slipped 0.5% by midday to the equivalent of $675.50 per ounce.

"Chances of a rise in interest rates are a negative for Dollar-based gold prices," said Koji Suzuki, an analyst at the Kazaka Commodity Company to Reuters earlier.

Referring to yesterday's higher than expected US labor-cost data, "the Tokyo market seems to take in advance the start of an anticipated correction in New York," he added.

But rather than leading New York, Tokyo's gold action regularly plays "catch up" with the Western markets the following morning.

And just like the Tokyo gold bullion market today, the Nikkei stock index dipped sharply – along with the rest of Asia – before pulling back to break even today.

Fears of higher interest rates may continue to weigh on stock today, however.

The FTSE in London sold off 1.7% yesterday on news that UK consumer confidence – a key piece of data for the Bank of England to mull over this morning – rose to an 18-month high in May.

Stocks also stumbled on Wall Street after the Labor Department said the cost of employing staff in the US rose 1.8% between January and March, three times faster than Washington's previous estimate.

"There are inflationary pressures coming from the labor market," said Julia Coronado, a senior economist at Barclays Capital in New York, to Bloomberg.

Yet US productivity growth slipped over the same period – and President Bush's own team of economic advisors yesterday cut their 2007 growth forecast from 2.9% to 2.3%.

Added together, yesterday's figures from Washington could risk spelling out the dread word "stagflation".

What would slow growth plus high inflation mean for gold? Click here to find out why the real rate of interest matters so much to gold bullion prices...

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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