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WHOLESALE GOLD
PRICES fell sharply in Asia and London on Monday, dropping 3.2% from
Friday's best weekly close in eight and falling below $791 an ounce.
The six-day rally in global stock markets also stalled on a fresh surge in
the US Dollar and Japanese Yen.
Government bond prices jumped on expectations of sharp cuts to Sterling and Euro interest rates later this week.
Warning that domestic credit is as tight now as during the worst of Japan's mid-90s' credit crunch, the Bank of Japan announced an emergency policy meeting for
Tuesday.
"A cascading series of crises [could] fall upon us," said United
Nations' secretary-general Ban Ki-Moon at a meeting in Doha, Qatar, this weekend, "each building on the last, with devastating social and political consequences
for us all."
The UN now forecasts global economic growth of just 1% in 2009 – a
"sub-par recession" marking the worst outlook since 1981.
"Virtually all" that growth will come from emerging and developing
nations, Ki Moon said.
The ongoing stand-off between Thai police and anti-government protesters at Bangkok airport – now in its seventh day – stemmed earlier profit-taking in
Gold sparked by a run of higher Baht prices, a dealer in Singapore told Reuters earlier.
Faced with their own fast-falling currency, "the Indonesians are also
very active since the Rupiah dropped to 12,000 from 11,000 against the US
Dollar," he added.
Gold Investment demand in Mumbai, India was "badly hit" by last
week's terror attacks, reports Commodity Online, with the Bombay Bullion
Association (BBA) reporting lost business worth up to $238 million
equivalent.
On the international wholesale Gold Bullion market today, "December
picked up where November ended as far as the metals are concerned," says
the gold desk at Mitsui Bussan in Hong Kong.
"A good close in New York last Friday could not attract fresh buying [in
Asia]. Sellers were probably those who bought before the weekend."
On the forex market this morning, the British Pound lost more than 3.5¢
to $1.50, capping the fall in gold for Sterling buyers at £527 an
ounce.
Versus the Japanese Yen, the Euro lost 2.3% to reach a one-week low near
¥118, while the Dax index of German stocks lost 3.5% to trade just above
4,500.
The Gold Price in Euros fell €21 per ounce to €624.
"Gold has come sharply lower this morning, breaking last week's
consolidation pattern," says today's Gold Market from Mitsui here in London,
and "the US Dollar is strengthening as possible rate cuts outside of the
United States dominate headlines.
"European and
Chinese factory activity has sunk to a record low. Europe, Australia and Britain
are all expected to come out with further sharp rate cuts this week in an
attempt to resuscitate demand."
The Baltic Dry index, which measures the cost of shipping non-perishable
solids, fell for the sixth month running in November, ending last week almost
95% below its record peak of late May at a 22-year low.
Today crude oil and the broader commodities complex fell sharply once more,
pulling the Goldman Sachs Commodity Index (GSCI) almost 2.9% lower.
Mid-term government bonds jumped, meantime – pushing the yield offered
to new buyers of 5-year bunds and gilts more than 0.12% lower – despite
a UBS forecast that developed-world governments will issue $2.5 trillion in
new bonds next year.
"Governments are already running into problems," says Roger Brown,
head of global interest-rate research at the Swiss investment giant. "We
do have to ask whether there will be enough investors to buy the bonds, or at
the very least over whether this will push yields substantially higher to
attract them."
Gold Mining output, in contrast, continues to shrink, with South Africa
– the former world No.1 – reporting a 16.2% decline in
third-quarter production from the same period last year.
Besides the energy supply problems which shut the entire South African mining
industry in January, the Chamber of Commerce blames "downsizing in the
gold mining industry and the significant impact of safety-related
closures."
The average ore grade of South Africa's gold output – the density of
gold particles per tonne of rock mined – fell by 3.7% between July and
Oct.
Over in Reno, Nevada today, the world's largest gold miner company, Barrick
Mining, will face a legal challenge from environmental and American Indian
groups lobbying against its Cortex project in the Crescent Valley.
The project had been forecast to produce one million ounces of gold per year.
Here in London today, AIM-listed coal, gold and antimony group Cambrian
Mining said it would cut overall production in a bid to reduce costs.
"Many gold mining groups around the world fritter away their margins on
trying to find new sources of supply, wasting the money on exploration and
expensive corporate activity," said fund manager Evy Hambro in
Melbourne, Australia last week at the annual general meeting of his listed
vehicle Global Mining Investments (GMI).
"I think shareholders want to see some of this margin coming back to
them in the form of dividends, paying off debt and retained earnings. I think
that is what people are really looking for to get Gold shares really moving
again."
Adrian Ash
Head of Research
Bullionvault.com
City correspondent for The Daily
Reckoning in London, Adrian Ash is head of research at http://www.bullionvault.com/#24hgold – giving you
direct access to investment gold, vaulted in Zurich, on $3 spreads and 0.8%
dealing fees.
Current gold price, no delay
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