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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold Cuts 2009 Gains to 30% as Eurozone Hits Deflation

Commodities / Gold & Silver 2009 Dec 30, 2009 - 04:29 AM GMT

By: Adrian_Ash

Commodities

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

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
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

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.

Adrian Ash Archive

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