Gold News

Spot gold prices steady ahead of Fed, Sterling and Euro rate decisions

Spot gold prices opened Tuesday in London more than 2% higher from the start of last week.

Trading at $687.50 per ounce, the Dollar price of gold dropped $2 on Monday as London – the world center for physical gold dealing – was shut for a British holiday.

The price of gold in Pounds began Tuesday in London at £345 per ounce, just £1 shy of Friday's close, as Sterling continued to trade between $1.9910 and $1.9970 on the currency markets.

Against the Euro, spot gold moved between €504.50 and €506.60 per ounce overnight in Asia.

The Euro price of gold began the day in London up 1.9% from the start of last week as the single currency struggled to regain its all-time records versus the Dollar and Yen.

In Tokyo, Japan's gold future for April 2008 dipped after hitting a 10-week high, dropping 0.2% to end Tuesday at the equivalent of $694 per ounce.

"Gold is pressured by strong profit taking today," reckons Shuji Sugata of Mitsubishi in Tokyo.

"There are plenty of sellers waiting at between $690 and $700."

Comex gold futures also ticked lower during their electronic session, pricing gold for June '07 delivery at $690.40 by the start of trade in London.

Dec. '07 contracts slipped $1.30 to $709.70 per ounce.

Looking at the market in physical gold bullion, "[last] week’s activity pattern [was] neutral," says Christopher B. Langguth in Mitsui's weekly technical analysis report. "It is frequently seen at the end of a rally.

"On the other hand a rally above $692.50 would break a double top and would have an immediate objective of the previous high, $728.00.

"Right now there is no reason to be short."

No reason to sell gold is expected from this week's flurry of interest-rate decisions either.

The US Fed meets Wednesday to set Dollar rates, currently at 5.25% and still 'accommodative' even after 17 rate hikes in two years.

Last Friday's US employment data showed below-forecast growth in April, with manufacturing, construction and retail all shedding jobs. (Could lower US rates stem the slowdown in US home sales? Find out here...)

On Thursday, the Bank of England in London is expected to raise Sterling interest rates, also currently at 5.25%.

But the raise is likely to be just one more 'baby-step' of 0.25% – the fourth since the Old Lady lost her nerve and then had to find it again at the end of 2005 – despite inflation running ahead of target at a 17-year high. (Get the full story on the Pound Sterling here...)

And the same day in Frankfurt, the European Central Bank will keep Euro rates on hold at 3.75% according to analyst consensus.

Money supply growth, however – former target of the ECB's predecessor, the German Bundesbank – neared 11% year-on-year in March, a two-decade high.

Political pressure to halt the ECB's slow-motion hiking campaign are mounting in Spain and Ireland, where credit-fuelled property bubbles are now beginning to unwind.

France's new president elect, Nicholas Sarkozy, may also add to calls for the ECB to stick with its easy-money policy.

"Independence doesn't mean indifference," said Sarkozy of the European Central Bank at the end of last year.

"We can't go on with the indifference of a certain number of bankers who don't understand that the priority isn't the fight against inflation which doesn't exist."

Gold has already gained more than 15% against the European currency since the ECB finally began raising its rates from 2.0% at the end of 2005.

To learn more about what the spot gold price is saying about the Euro today, click here now...

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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