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London Gold
Market Report
THE
PRICE OF PHYSICAL GOLD fell
hard early in London
on Tuesday, returning from the long holiday weekend to drop 1.7% as the US
Dollar and Japanese Yen rose sharply on the currency markets.
Global stock markets fell while government bonds rose.
Crude oil slipped back below $60 per barrel
despite North
Korea
further defying the United Nations Security Council and test-firing two
missiles as a follow-up to yesterday's 20 kiloton underground nuclear test.
"It is the options expiry on the June COMEX Gold contract today,"
says today's commodities note from Standard Bank here in London.
"As a result there might be some volatility as participants attempt to
achieve certain strikes" – the price at which the option to buy/sell
gold in June closes and is thus settled.
"Looking at the dispersion of option strikes and open interest, it
appears the market would battle it out for a move either above $950 or below
$930."
The Gold held in trust to back New
York's SPDR fund –
now backing 98.23% of each share in issue as metal is taken to cover storage
fees – swelled on Friday for the first time in two months, growing to
over 1,118 tonnes.
Speculative investors grew their bullish position in Gold Futures and options
to a near 3-month high in the week-to-last Tuesday, according to the latest
data from US
regulator the CFTC.
More than three times the "net long" position in Gold Futures hit
in Nov. 2008, the difference between bullish and bearish bets made by hedge
funds and other large speculators remained 25% below the record peak of Oct.
'07 and Feb. '08.
"Some physical selling is back in the market" with London and New
York re-opening after the 3-day weekend, said Dick Poon,
local manager for German refining group Heraeus in Hong
Kong, to Reuters earlier.
"This is not the first time [North Korea
has tested missiles], so I don't think it's a problem."
But "If a nuclear test cannot produce safe haven buying," counters
one London
dealer, "surely the short term outlook [for gold] turns negative."
"There are still plenty of problems out there, and I think you are going
to continue to see flight to safety be an important factor," reckons
Bill O'Neill, co-partner at futures-trading consultants Logic Advisors.
"Inflation seems to be an inevitable development. I think demand for
hard assets will continue to be strong, and Gold will slowly but surely
benefit from that."
Last week US
president Barack Obama said in an interview with C-Span's Mike Scully that
"Well, we are out of money now. We are operating in deep deficits"
after being asked about the $11 trillion national deficit.
America's
unfunded liabilities for retirement and health-care meantime total more than
$99 trillion, says analysis from the Dallas Federal Reserve – "a
very deep hole" in the words of Dallas Fed president Richard Fisher.
"I don't know a single person on the [Fed policy team] who is rooting
for inflation or who is tolerant of inflation," Fisher tells the Wall
Street Journal in an interview.
But on a recent tour of China,
Japan,
Hong Kong, Singapore
and South
Korea
however, "I was asked at every single meeting about our purchase of Treasurys [i.e. Quantitative Easing]. That seemed to be
the principal preoccupation of those that were invested with their surpluses
mostly in the United
States.
That seems to be the issue people are most worried about."
"The charts suggest the Dollar is oversold, but people are starting to
ask existential questions about the United
States," says T.J. Marta, RBC strategist and
founder of the eponymous Marta on the Markets in New Jersey, speaking to Reuters.
Today the US Dollar jumped 1.5¢ better to the British Pound, curbing the
drop in Sterling Gold Prices at £598.40 per ounce – down less
than £3 from Friday's close.
For Eurozone investors now Ready to Buy Gold,
the price was unchanged at €682 an ounce as the Euro briefly dropped
beneath $1.39 – the 2009 high first recovered last Thursday.
"The fear is about how much the [US] government can do," says
Marta. "It's underwriting the banking system, the insurance industry,
the auto sector. At some point, people say, 'Oh my God, is the whole thing
going to implode?'"
Adrian Ash
Head of
Research
Bullionvault.com
All
articles by Adrian Ash
City
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
fees.
Current gold price, no delay | FAQ | Detailed outlook for 2007
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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