Gold Consolidating in USD and Near Record Highs in EUR and GBP

By: GoldCore

Gold went as low as $1,150/oz early in New York, it then rose to $1,161/oz before ending with a gain of 0.13%. It has range traded from $1,151/oz to $1,156/oz in Asian and European trading this morning. Gold is currently trading at $1,155/oz and in euro and GBP terms, gold is trading at €853/oz and £748/oz respectively. Gold rallied from below £745 to £749.60 per ounce overnight on UK hung parliament and economic concerns (see gold GBP chart below).

Gold appears to be in consolidation mode after its recent gains and is trading in a range between $1,143 per ounce and $1,170 per ounce, which are support and resistance. Gold remains near record highs in euros and pounds and given the very large US deficits, looks likely to reach record (nominal) highs in dollars in the coming weeks. While risk aversion has benefited the dollar in recent months this may not always be the case given the real challenges that the US will have in funding its deficits.

Risk appetite remains evident despite the Greek debt saga continuing (see NEWS below) with the yield on Greece's benchmark 10-year government bond surging to 7.319 percent yesterday. This is higher than the level before the rescue package was announced on April 11 and cost of insuring against Greek sovereign debt default also touched a record high. Thus, sovereign debt and currency concerns continue and should see gold continue to remain robust (in all currencies).

Silver
Silver has increased from $18.24/oz to $18.38/oz this morning in Asia. Silver is currently trading at $18.37/oz, €13.55/oz and £11.89/oz.

Platinum Group Metals
Platinum is trading at $1,720/oz and palladium is currently trading at $541/oz. Rhodium is at $2,975/oz.

News
Most of Europe is expected to remain a no-fly zone on Friday after a vast cloud of volcanic ash from Iceland forced authorities to impose one of the most extensive bans on commercial flights since World War II. Thousands of passengers are stranded or diverted elsewhere as airlines struggle to cope with the unusual presence of a volcanic plume drifting across one of the world's busiest airways.

There are concerns that should the volcano continue to erupt or the eruption intensify then air traffic disruption could be prolonged with resulting economic consequences.

European Union finance ministers meet in Madrid today to discuss how to curb swelling budget deficits as Greece moved closer to asking for emergency aid to finance the region's biggest shortfall.

Greek debt fears continue and Greece gave in to market pressure yesterday by taking a step towards a bailout from its eurozone partners and the International Monetary Fund. Greece formally sought "consultations" over the €30bn-plus loan package to prevent default. In a letter to the European Commission, Greece's finance minister, George Papaconstantinou, said Athens wanted to discuss "a multi-year economic policy programme with the Commission, the European Central Bank and the International Monetary Fund".

US crude dropped to below $85 a barrel on Friday as concerns about US demand re-emerged and the dollar strengthened, making imports more expensive for emerging economies where consumption is surging. An unexpected jump in the weekly number of US workers filing new jobless benefit claims tempered sentiment across markets on Thursday.

Malaysian Prime Minister Najib Razak has confirmed that Malaysia has cut off gasoline supplies to Iran, warning Tehran it was close to facing new international sanctions over its controversial nuclear program. The announcement came three days after the PM held talks with US President Barack Obama, who had called for the world to move "boldly and quickly" on tough sanctions against the Islamic republic.

This update can be found on the GoldCore blog here.

Mark O'Byrne
Director

WINNERS MoneyMate and Investor Magazine Financial Analysts 2006

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