Gold Market Report
PRICE OF GOLD rose sharply as the US Dollar fell Thursday morning
touching four-session highs above $960 an ounce as world stock markets rose
for the third day running.
The Dollar fell further to one-week lows against the Euro after France
said their economies grew between April and July, capping 9 months of
Last night the Federal Reserve confirmed that it will continue creating
dollars to buy US government debt and higher-risk mortgage-backed securities.
"Market sentiment changed overnight after the Federal Reserve's
statement," said one Hong Kong dealer
today, noting the correlated move higher in Euros, gold, oil and equities.
"Gold Prices were bolstered by the US Federal Reserve," agrees
Investec Bank in Australia.
"[The Fed] signaled its strong resolve to keep interest rates at near
zero, thereby enhancing bullion's status as a hedge against inflation."
Selling at the $950 level was said to be "well absorbed" during
Asian wholesale trade today. Indian Gold Prices dipped as the Rupee bounced
vs. the Dollar. Japanese Gold Futures traded in Tokyo
ended the day 1.5% higher at ¥2,955 per gram.
Adding 1.9% from yesterday's two-week Dollar low, the Gold Price also rose
and European investors, breaking new August highs vs. the Pound at
The Gold Price in Euros rose 1.0% from Wednesday's dip to breach €673
"In the current environment, it is just too obvious that gold has an
important function in the monetary system," says Axel Merk, manager of
the California-based $415 million Merk Hard & Asian Currency Funds in California.
Given near-zero interest rates and ongoing quantitative easing worldwide,
"We just don't know what would happen to currencies."
Also pointing to last week's renewal of the Central Bank Gold Agreement
– under which 19 European authorities will cap and pre-announce any
sales from their gold reserves until 2014 – "The attitudes of the
central banks right now are a very solid reaffirmation of the value that gold
can bring to a properly balanced portfolio of reserves," says George
Milling-Stanley at industry-marketing group the World Gold Council.
"Sales under CBGA 3 will likely undershoot the 400 tonnes. It is just a
ceiling, not a target."
To reach 400 tonnes a year, "certainly on a consistent basis, you would
need sales from either Germany
says Stephen Briggs, analyst at RBS Global Banking, "and there are no
signs of that at the moment."
Today the Swiss National Bank said it's sold 105 tonnes of gold to the
private sector over the last 12 months, completing its planned sale of 250
tonnes under the previous CBGA, which expires on Sept. 26th.
"The proceeds," says the SNB, "amounting to CHF 3 billion
[$2.8bn] were invested in securities."
On the data front, meantime, consumer-price expectations put the rate of
Australian inflation at 3.5% over the coming year, the Melbourne Institute
said today, the highest level in 10 months.
Friday brings Consumer Price data for July from both the Eurozone and United
Reviewing the Eurozone's 0.1% economic shrinkage in the second quarter of
2009, "The latest data conﬁrm the ongoing
deceleration in broad money and credit growth," says the European
Central Bank in a new report.
"These developments support the assessment of a slower underlying pace
of monetary expansion and low inﬂationary
pressures over the medium term," the ECB reckons.
Early Thursday, European oil prices jumped 2.2% to $74.50 per barrel after
the International Energy Agency raised its global demand forecast.
Long-term interest rates rose as government bond prices fell in the open
market, pushing 10-year German Bund yields up to 3.50%.
Head of Research
by Adrian Ash
for The Daily Reckoning in London, Adrian Ash is head of research at BullionVault.com –
giving you direct access to investment gold, vaulted in Zurich, on $3 spreads
and 0.8% dealing fees.
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Information or data included here may have already been overtaken by events
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