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London Gold
Market Report
THE WHOLESALE
PRICE of physical gold rose again in London trade on
Tuesday, hitting fresh record highs for both US Dollar and British Pound
investors after yesterday's "negative watch" announcement on US
government debt from ratings agency Standard & Poor's – a
"shot heard round the world" according to one London bullion
dealer.
Asian stock markets closed Tuesday lower, but European equities rose.
US Treasury bond prices actually rose, despite S&P forecasting "at
least" a one-in-three chance it will downgrade the United States'
long-term debt from AAA status by 2013, unless Washington cuts its deficit
spending.
The Dollar knocked the Euro currency almost 4¢ lower as "peripheral
Europe" government debt fell yet again.
"You really have to wonder how anyone can write with a straight face
that this warning caused other market movements," says Princeton
professor and Nobel laureate Paul Krugman of the
S&P announcement.
"A significant push toward fiscal austerity would lead to lower
growth," replies Jan Hatzius at investment
bank Goldman Sachs, "and lower growth would lead to easier monetary
policy for longer."
"Gold is re-asserting itself as an alternative currency,"
London-based mining-fund manager Evy Hambro of Blackrock was quoted by Bloomberg TV this
morning.
"On a 3-to-5 year period," said Hambro,
noting the key drivers for investors to buy gold, "the underlying trends
are all very supportive of today's pricing and higher."
The price of gold in Euros also held onto Monday's sharp gains today, trading
near to last night's 14-week highs at €33,800 per kilo – less
than 1% below Dec. 2010's all-time high.
UK investors looking to buy gold saw the price touch £920 per ounce, a new all-time high.
"We see some selling interest today on profit-taking, but not in large
volume," a dealer told Reuters overnight in Hong Kong, where premiums on
large wholesale gold bars ticked up to $1.50 per ounce above London's benchmark
pricing.
"There is so much news that is in favour of gold," the newswire
quotes a Singapore dealer.
"Gold is still the safe-haven of choice."
In Tokyo today, fiscal-policy chief Yosano and
finance minister Noda of Japan – the world's second-largest holder of
US government debt after China – both called US Treasury bonds
"attractive".
"This is a timely reminder of the seriousness of America's fiscal
issues, for the country and for the rest of the world," says bond-giant Pimco's chief investment officer Mohamed El-Erian.
As Helsinki today moved to form a new government including the "no bail
outs" True Finns party, which won almost one-fifth of the votes in
Sunday's Finnish election, Portugal's 10-year bond yield today rose above
9.0%, worsening the pressure for a swift IMF-Eurozone
rescue.
"Spain, Italy and Belgium had been shielded from the events in Greece,
Ireland and Portugal for a long time," said Christoph
Rieger, fixed-income strategist at Commerzbank, to Bloomberg TV this morning.
"But with risk events culminating over the last few days, and also [new
debt auction] supply lined up for later this week, we're seeing increasing
contagion [in their] bonds."
Silver prices meantime held firm but failed to set a new 31-year Dollar high
for the first session in four on Tuesday, trading just above $43 per ounce.
"[Selling silver short] natural with these giddy prices," one
London trader told the Platts news service on
Monday. "Speculators are going to have to take profits soon.
"Shorts have been burned in the run-up, but keep coming back for
more," he said, forecasting a $10 silver price drop in short order.
But "Gold and silver prices are likely to continue to climb higher in
reaction to inflation concerns," retorts HSBC senior analyst James Steel,
"buoyed by rising food and energy prices, renewed European Union
sovereign risks, and disagreement among top policymakers as to how to cope
with the global crisis."
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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