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London Gold Market Report
THE PRICE OF GOLD slipped but held above yesterday's two-week
low in London dealing on Friday morning, giving back half of Asia's 1% rally
against the Dollar as the US currency rose for the fourth day running on the
forex market.
Global stock markets ticked lower, as did broad commodity prices.
The Euro fell again towards $1.325 – helping push the gold price in
Euros back above €33,300 per kilo – despite a record-high reading
of German business confidence and a new "crisis resolution"
agreement between European Union leaders meeting in Brussels.
Not starting until 2013, however, the deal delivers "little
concrete" and "nothing to advance the [current] near-term
measures" according to analysts.
Ireland's debt was today cut 5 notches to near "junk" status by the
Moody's ratings agency, putting it on a par with Russia and Lithunia notes
Reuters.
"Sovereign bonds have lost some of their 'risk free' attributes over the
last couple of years, and trust in fiat currencies has been eroded,"
writes HSBC Bank's head of asset allocation Fredrik Nerbrand in a new report.
"No wonder many investors are choosing to buy gold as a hedge against
the risks of paper assets."
US Treasury bonds rallied on Friday, pushing 10-year yields back down to
3.38% from yesterday's new 7-month high at 3.56%. But fund managers in Europe
have been cutting their exposure, according to a Bloomberg survey, reducing
their US T-bond holdings by 1.4% in November.
Nerbrand's team at HSBC reckon that gold investment accounts for just 0.14%
of the average global portfolio today.
"If this figure increases, as we expect, the gold price could rise
significantly...We believe asset allocators are likely to increase their
weighting in gold over the next ten years if they focus on risk
management"
Gold has delivered the "greatest success" of strategies applied by
Paulson & Co., the world's third largest hedge fund, reports the Financial
Times meantime.
Betting on corporate events such as mergers & acquisitions has returned
14.3%, says the FT, while Paulson's Credit Opportunities Fund has
risen by 16.5% in 2010.
The Paulson & Co. Gold Fund has risen by 35%. Dollar prices for plain
gold bullion have gained 23.4%.
"Profit-taking on the recent rally saw gold lose considerable ground on
Thursday...exacerbated by a strengthening Dollar," notes Walter de Wet,
senior commodities analyst at Standard Bank, today.
"Yesterday’s dip in gold prompted some bargain hunting, led by the
physical markets. Speculative action in the form of short-covering has also
lent some support," he says, but gold prices are "continuing to
yo-yo about."
Adrian
Ash
Head of Research
Bullionvault.com
You can also Receive
your first gram of Gold free by opening an account with Bullion Vault : Click
here.
City correspondent
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.
Please Note: This
article is to inform your thinking, not lead it. Only you can decide the best
place for your money, and any decision you make will put your money at risk.
Information or data included here may have already been overtaken by events
– and must be verified elsewhere – should you choose to act on
it.
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