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London Gold Market Report
THE PRICE OF GOLD reversed
an overnight dip beneath $1500 per ounce in
London on Tuesday morning, trading
within 1% of Monday's new
record high at $1518 as European stock markets rose together with major government bonds and energy prices.
Following yesterday's
dramatic Asian trade and greater-than-7% price
range, "Silver showed
further weakness" according to one Hong Kong dealer, "stretching [his] expectation about how volatile it
could be."
At today's
London Fix – set at
$45.48 per ounce – the price
of silver bullion had only been higher on four days in history, three of them amid the Hunt Brothers' Corner of Jan. 1980, and the other being Thursday last week.
"Despite
silver setting new nominal record highs in the past week, the Comex net long position [in silver
futures contracts] is far
from record levels,"
says the latest Precious Metals Weekly for ABN Amro from the VM
Group in London, "implying that
[London-centered] physical
trade is driving the price."
Friday and Monday's
Bank Holidays in the US and UK meant
"markets had a
chance to go wild on thin
volumes," says one London dealer, but after surging to new record highs gold settled last night at $1510 per ounce – the
first drop in 8 trading days, as Russell Browne at Scotia Mocatta
notes.
Silver saw a "long legged Doji" chart pattern, Browne adds, "warning of a
possible reversal" by touching new highs intra-day but falling back to end the session unchanged.
"There is
some good, old-fashioned...[and] routine speculation...in
the few commodities that can be stored,
like gold," writes
Jeremy Grantham, co-founder and chief
investment strategist of
the $107 billion GMO asset manager, in his latest letter
to clients.
"[But] I believe
this is a small part of the total pressure on [raw
material] prices, and the
same goes for low interest rates. [Instead] we have gone through a profound paradigm shift in almost all commodities, caused by a
permanent shift in the underlying fundamentals" as limited supply meets vastly increased demand from Asia's
fast-emerging economies.
"Statistically,"
says Grantham, "most
commodities are now so far away from
their former downward
trend that it makes it very
probable that the old
trend [of steadily falling
input prices] has changed.
"[This is ] perhaps
the most important economic
event since the Industrial Revolution."
Monday saw shares in Barrick – the world's largest listed gold mining stock
– lose 5% after it successfully bid 14 times last year's earnings at take-over
target Equinox, a copper miner.
Asian investors also sold Chinese
loser Minmetals, however,
driving it 12% lower in Hong Kong, after it said "the price offered by Barrick is above
our most optimistic assessment of
value... [and] would, in our
view, be value destructive
for [our] shareholders."
Over in Venezuela, meantime, 20 armed robbers broke into, seized control of, but failed to steal any gold from the El Callao facilities of Russian gold mining firm Rusoro.
"They did get into
the storage area but they
were unable to open the armored security safes" before fleeing the scene, Rusoro's local security chief told Globovision
TV.
In the credit
markets, a new report from
Deutsche Bank ranks the US government
as the world's fourth riskiest sovereign borrower, behind Greece, Ireland and Portugal, and just
ahead of Italy.
Here in London on Tuesday, UBS's City office asked the decisions committee of the
International Swaps & Derivatives Association
to say whether the Irish government's new Credit
Institutions Act signals
a "restructuring credit
event" for Anglo
Irish Bank.
The Act orders AIB to buy back certain
"subordinated liabilities"
from bondholders, potentially triggering bets against the bank's debt known
as credit default swaps.
Yields offered to
new buyers of Irish, Greek
and Portuguese debt all
rose to new post-Euro records on Tuesday morning,
as prices continued to fall.
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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