Gold Cuts 2009 Gains to 30% as Eurozone Hits Deflation
Commodities / Gold & Silver 2009 Dec 30, 2009 - 04:29 AMBy: Adrian_Ash
THE WHOLESALE PRICE of investment-grade gold dropped to a 3-session low at the start of London dealing on Wednesday, cutting its 2009 gains vs. the Dollar to 30% and losing 2.1% for the week so far.
World stock markets fell together with government bonds. The US Dollar ticked higher on the forex market.
Crude oil held near a 77% gain for the year above $79 per barrel.
Copper and zinc traded at the London Metal Exchange ticked higher from Tuesday's 15-month closing highs.
"With [the Tocom gold futures exchange in] Japan out today and the holidays upon us, trading has been thin overnight and the market remains vulnerable to sharp moves," says a note from precious metals dealer Mitsui.
"The whole key to the gold market is the Dollar," reckons Marty McNeill, a trader at R.F.Lafferty Inc. in New York.
"We could have some strength in the Dollar going into the New Year."
"Between Christmas and year-end, the volume in the market shrinks rather drastically," says Afshin Nabavi, head trader at MKS, the Swiss refinery group, also speaking to the Wall Street Journal.
"Because of scale-down buying by traders looking to sell onto jewelers, the market is probably not as low as it could be."
The China Daily reports a "rush" to buy gold as the Chinese New Year shopping season begins, with major department stores slashing jewelry prices by 3% to launch their promotions.
China National Gold, a major retailer, claims to have doubled its sales last weekend.
The Chinese year of the Tiger starts on Feb. 18th. Chinese households are now the largest single market for privately-bought gold, overtaking India decisively in 2009.
Meantime in Tokyo on Wednesday, the Nikkei stock index lost 0.8% on its last trading day of 2009, ending the year higher by one-half from March's quarter-century lows as shares in Japan Airlines plunged to a record low on fears the failing carrier is about go bankrupt.
Today the 16-nation Eurozone reported deflation in its money supply, with the broad M3 measure contracting by 0.2% last month from Nov. 2008.
The European Central Bank's target rate – set when the Euro was launched a decade ago – was for 4.5% money-supply growth year on year.
M3 growth in the 350-million citizen currency union hit a 30-year peak of 12.3% annually at the end of 2007.
German Bunds fell in price, however, driving yields up to new 2009 highs above 3.37%.
Ten-year UK gilt yields rose above 4.09% – a fresh 2009 high – as the Pound fell hard to new 11-week lows beneath $1.5860 on the currency market.
The Euro gave back Tuesday's brief rally above $1.4400, trading in a tight range around $1.4330 and holding the gold price in Euros above €760 an ounce.
British investors looking to buy gold today saw prices in the wholesale professional market dip to £688 an ounce – also more than 24% higher for 2009.
By Adrian Ash
BullionVault.com
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Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and 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.
(c) BullionVault 2009
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