Gold Very Bullish Breakout
Commodities / Gold and Silver 2010 Mar 03, 2010 - 08:25 AM GMTBy: Adrian_Ash
GOLD DEALT in the professional wholesale market rose further on Wednesday morning in London, extending what one dealer calls Tuesday's "aggressive rally" as stock markets and commodity prices held flat.
The Dollar slipped vs. the Euro after the Greek government agreed a fresh round of "austerity" measures and the private-sector ADP report said US payrolls fell by 20,000 last month, rather than the 13,000 loss analysts forecast.
Priced in Euros and Sterling, spot gold held onto yesterday's gains, proving itself "a very bullish market" in the words of one bank analyst.
"Trading interest continues to be disappointingly slow in Asia despite the volatility in New York," said a Hong Kong dealer in a note this morning.
"A shake-out of the weak longs cannot be ruled out before a major rally will start."
"I guess the market is still consolidating," said another Asian dealer to Reuters earlier.
"There's some fresh buying in gold but it seems the market can not move up too high."
Latest data from the Bombay Bullion Association says gold imports to India – still the world's largest private buyer, just pipping Chinese households in full-year 2009 – rose to 28 tonnes in Feb., some 40% above the same month last year.
"We continue to see a steady flow of physical buying interest," reports Standard Bank today, and "The fact that gold is pushing higher in most currencies is a clear indication of good physical buying.
"However, speculative interest [in US Gold Futures] is also rising."
Hitting $1141 an ounce vs. the Dollar here in London today, the gold price held just shy of yesterday new all-time highs for Euro and Sterling investors this morning, but recorded fresh peaks at the AM Gold Fix.
The fifth record Gold Fix in succession for UK gold owners, today' price of £755 an ounce stood more than 10% higher from the start of the year.
Sterling meantime ticked back above $1.50 on the forex market after better-than-expected services sector data.
Tuesday's successful auction of 30-year UK government gilts – the first debt sale since the Bank of England stopped creating money to buy government bonds for its £200bn asset-purchase program – was followed this morning by a strong auction of five-year gilts, sold for an average yield below 2.8%.
Ongoing industrial action across Greece failed to stop the Athens government today freezing civil-service pensions, cutting salaries, and raising VAT sales tax in a bid to cut its budget deficit by a further €4.8 billion.
Greece needs to sell an additional €10bn of debt due next month as existing bonds mature.
For US investors, meantime, "The fact that last week's...fall only took the gold price to $1088.10 before giving way to another up-leg shows underlying strength," says Commerzbank technician Axel Rudolph in his latest analysis.
Four weeks ago he forecast "a slide back toward" the Oct-low/Sept-high of $1,025 an ounce.
"We will become short-term bullish if, and only if, the $1135.50 [level] is overcome," wrote Rudolph on Tuesday, citing the 50% retracement of the $180 decline from early Dec. to early Feb.
A new report from RBC Capital Markets meanwhile repeats their view that global silver demand will outpace new mine supply in 2010, helping maintain Dollar-prices at $15 an ounce.
"The Chinese Renminbi...is assessed to be substantially undervalued from a medium-term perspective," says a note from the International Monetary Fund given to G20 finance officials last weekend and now made public.
Saying that both the Euro and Japanese Yen are now trading near their "fundamental value", the IMF analysts believe the US Dollar remains over priced.
"The European Union appears ready for stronger economic coordination and stronger economic governance," said EU commission president Jose Manuel Barroso to reporters this morning as Greece announced its latest austerity measures.
"The financial crisis has highlighted our interdependence. It's much clearer now, the need to act together."
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 2010
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