Gold "Well Positioned", Hits New Euro Record, as Oil Drops with Asian Stocks
Commodities / Gold and Silver 2010 May 17, 2010 - 08:29 AM GMTBy: Adrian_Ash
THE PRICE OF GOLD in London's wholesale market slipped 1.2% from an early gain vs. the Dollar on Monday, touching new record highs for Euro and Sterling investors as Asian stock markets closed the day sharply lower.
European stock markets rallied as the Euro currency bounced from a new 49-month low at $1.2240.
Crude oil fell towards fresh 3-month lows against the Dollar at $71 per barrel, taking its losses for May-to-date to almost 18%.
"Gold [on Friday] achieved its seventh up-week in the past eight weeks," notes the latest technical analysis from bullion bank Scotia Mocatta.
"The top of the two-year bull channel comes in today at $1352. The higher highs and higher closes keeps the risk to the topside."
"Gold holdings by physically-backed ETFs climbed 44 tonnes in the past week alone, reaching 1,792 tonnes," says the latest Commodities Weekly note from French bank Natixis.
"We suspect that the principal buyers of this gold were from Europe, as reports indicate that traders and coin dealers in Germany and Switzerland sold volumes of bars and coins three to four times their normal levels."
The Austrian Mint says it sold more coins in the first two weeks of May than it all of Jan., Feb. and March.
On the futures market, "Gold is still well positioned to withstand a large-scale liquidation should risk aversion rise sharply," says Walter de Wet at Standard Bank this morning.
"Speculative length in gold remains at acceptable levels despite the rally seen over the past two weeks. Speculative length in silver now also seems better positioned against risk aversion.
Silver prices today held 2.7% below Thursday's two-year high of $19.90 per ounce.
New data, released by US regulator the Commodity Futures Trading Commission late Friday, showed non-industry players holding a "net long" position in gold equal to 1009 tonnes of metal by last Tuesday's close – the largest volume of bullish minus bearish bets since the all-time peak of 1021 tonnes hit in Oct. 2009.
As a proportion of all Comex gold futures and options contracts, however, that near-record "speculative long" slipped to 33% – in line with the last 18 months' average.
"Gold continues to benefit from its safe haven status," says one London dealer.
"While gold is still over-bought in US Dollar-terms, it is underpinned by its outperformance versus European currencies and other metals," says a Hong Kong dealer.
Two days after running a lengthy defence of the bail-out from ECB president Jean-Claude Trichet – who called on Eurozone politicians to make a "quantum leap" in managing what he says is "the most difficult situation since the Second World War, perhaps even since the First World War" – Germany's Spiegel newspaper today runs the opposite view from former Bundesbank chief Karl Otto Pöhl.
Leader for 11 years of the ECB's intellectual forerunner and model, Pöhl says last week's €750bn agreement is "an offence against all the rules" of the Eurozone project, making the Euro "a weak currency.
"It is expressly stated in the European Union treaties that no state is responsible for the debts of another. But what we're now doing is exactly that."
German Bunds eased back from last week's crisis highs early Monday, while the gold price in Euros leapt to a new record high at €1014 an ounce.
The gold price in Sterling jumped to a new record high above £869 an ounce after new Con-Lib coalition chancellor George Osborne was quoted calling the previous Labour government "totally irresponsible...[It] has left this country with absolutely terrible public finances."
The Pound fell to a new 14-month low beneath $1.43.
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 2010
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