THE PRICE OF PHYSICAL GOLD jumped in US
Dollars for the third session running early Monday in London,
recording the best AM Gold Fix since Feb. 24th at $987 per ounce.
Stock markets also leapt worldwide – up more than 3.0% in Frankfurt –
while commodities added to last month's 34-year record gains.
The US Dollar fell against all other currencies. Long-dated government bonds
also fell, pushing interest rates higher.
"We believe in a Strong Dollar," said US Treasury secretary Tim Geithner to students at Peking
this weekend, "and we're going to make sure that we repair and reform
the financial system so that we sustain confidence."
Geithner's speech was greeted with laughter
according to the London
"Chinese assets [held in Dollars] are very safe," he went on.
"We're committed to bringing our fiscal deficits down over time to a
Today General Motors filed for bankruptcy protection, with $30 billion of
government money ear-marked for restructuring the auto giant.
GM has already received $20 billion of tax-funded aid.
Economists at Barclays Capital in New
York are meantime urging
the US Federal Reserve to hike its "Quantitative Easing" of
long-term interest rates, Reuters reports, creating
three times its planned £300bn of new money to bid up government bonds
and push longer-term yields lower.
The Treasury needs to sell a record $2 trillion in new US
bonds this year to fund the shortfall between its
spending and tax receipts.
"We see the $1000 level [in Gold] as the next obvious target from
here," says the daily note from London
market-makers Scotia Mocatta.
"The bullish picture for bullion is confirmed by the weekly candlesticks
which have seen four consecutive up weeks for gold."
But it will be "interesting" to watch for "bouts of
liquidation" in Gold Investment as the price approaches $1,000 says
"It is worth noting that speculators on Comex are now very long,"
says UBS analyst John Reade, quoted by Dow Jones, "and with no sign of
strong inflows into the ETFs, the Dollar must
weaken further for gold to make more ground."
Jumping 11% to the greatest level since July '08, the "net long"
position in Gold Futures held by hedge funds and other large speculative players
rose for the fifth week running in the week-to-last Tuesday.
Speculative gold buying on the futures market, however, remains one-seventh
below the record peak hit in January last year, according to data from US
regulator the CFTC.
"High returns don't tend to come from high quality assets – but
wealth preservation does," says Charles Morris, manager of HSBC bank's
$2-billion Absolute Return fund, speaking to Fund Strategy magazine.
His wealth management offering now holds a 10% allocation to gold.
"It's the highest quality asset of all. It's about permanence of
long-term value. [Gold's] relative value through time is constant."
Monday morning saw the US Dollar fall through $1.42 per Euro for the first
time in 2009.
The Euro gold price touched its best level in 5 weeks at €697 an ounce,
but for Sterling investors now Ready to Buy Gold, the price fell as the
Pound soared, dropping 0.8% from last week's close
at £605 as the UK
currency broke new 8-month highs above $1.64.
When the Pound traded at $1.64 in Jan. 2000, the UK
Gold Price stood at £175 an ounce. It rose to £220 when Sterling
next reached that level in Jan. 2003, and rose further to £230 an
ounce, £475 and now above £600 as GBP/USD crossed that price
"We do not believe the IMF Gold Sales, should they occur, will harm Gold
Prices," said HSBC analyst James Steel last Friday, referring to the
possible approval of a 400-tonne sale by the International Monetary Fund.
retains a 17% controlling vote in the IMF. Congressional approval may be
sought this week.
Dollar-price gains were meantime also strong Monday morning across the
commodities market, with copper breaking above $5,000 per tonne and crude oil
adding 2.4% to $67.85 per barrel.
RTS stock market jumped almost 6%, while the Polish Zloty added nearly 2% vs.
the Euro on the currency markets on news that Poland's
industrial output shrank at a slower pace in May from April.
Operating profits at Australian corporations fell 7.2% in the first quarter
from the end of 2008, new data showed, while cash earning for Japanese
workers shrank 2.5% month-on-month in April.
Eurozone manufacturing sentiment improved in May on
the PMI index, and rose sharply in the UK.
manufacturers reported the third month running of increased output.
Head of Research
articles by Adrian Ash
correspondent for The Daily Reckoning in London,
Adrian Ash is head of research at www.BullionVault.com –
giving you direct access to investment gold, vaulted in Zurich, on $3 spreads and 0.8% dealing
Current gold price, no delay | FAQ | Detailed outlook for 2007
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