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Gold & Silver Find "Massive Demand" from Private Investors

Commodities / Gold and Silver 2011 Jan 18, 2011 - 08:24 AM GMT

By: Adrian_Ash

THE PRICE OF GOLD and silver bullion prices rose together with all major currencies on Tuesday morning vs. the Dollar, erasing last week's losses for US investors as European stock markets gained more than 1%.

Asian bullion dealers reported "continued physical demand" in both gold and platinum.

The Euro briefly rose through $1.34 for the sixth time in as many weeks, while the British Pound jumped to two-month highs over $1.60 on news of the sharpest month-on-month rise in UK Consumer Prices since Aug. 1990.

"Gold bullion's recent losses look set to worsen, with a technical target suggesting a fall to as low as $1230 per ounce," says Reuters North Asia editor Phil Smith in a technical analysis.

Spying a "possible [head and shoulders] topping pattern...we are now sitting on the neckline," says Smith. "Watch for a break below this line" near $1350.

"Should we break $1350, we could go much lower," agrees chart analysis from Swiss refiner MKS's finance division.

But "We will see quite a bit of bargain hunting if price dips below $1360," reckons Shanghai CIFCO Futures' analyst Li Ning Prices, "because physical demand ahead of [Feb.3rd's] Lunar New Year will help support."

Eurozone and UK government bond prices meantime slipped on Tuesday morning – nudging open-market interest rates above 7% on Portuguese debt – even as US Treasuries ticked higher.

The fact that "Inflationary pressure is increasing in the Eurozone and UK is not only ironic," notes Steve Barrow at Standard Bank, because "Japan and the US want higher inflation, but it presents particular problems to the ECB and BoE as they are the ones that attempt to meet [formal] inflation targets, while the Fed and BoJ do not."

UK consumer prices rose 3.7% last month from Dec. 2009, need data showed today.

The Bank of England's mandated target sets an upper limit of 3.0%, which was breached throughout 2010.

In contrast with this month's heavy selling of gold ETF trust-fund positions by institutional investors, private investors "have so far not been influenced by the doubts creeping in at their professional fund-managers," says German refinery group Heraeus' head of sales Wolfgang Wrzesniok-Rossbach in his first Precious Metals Weekly of the New Year.

Indeed, "in the last two weeks [retail investors] have bought large quantities of gold bars and coins; so much so that despite higher production, some denominations again already have delivery-time delays."

Similarly in silver bullion products, Heraeus reports "massive demand for bars and coins", even as ETF trust funds and Comex futures contracts "saw considerable profit-taking driven liquidations" by institutional traders.

"The decline [in global silver investment positions] was mainly due to the US iShares product," says London's VM Group in its latest analysis for ABN Amro, noting the "largest fall since mid-April 2010" in the world's largest silver ETF.

Gold bullion and derivatives also suffered "a sharp fall in global investment," the consultancy notes.

Over in the commodity markets on Tuesday, Europe's Brent crude-oil benchmark slipped further from Friday's 25-month high of $99 per barrel.

Contrary to last month's "no change" agreement, several members of the Opec oil cartel are actually raising output, says the International Energy Agency, following "tacit recognition by some producers of a need to adjust actual production levels to try to take some of the steam out of the market."

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

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 2011

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Comments

Akhil Khanna 19 Jan 11, 06:30

Why invest in Gold? One thing I fail to understand is that why most analysts are recommending the purchase of Gold as a safe investment? The problem today is that the price of Gold is not derived by it's physical demand or supply but more by the speculative positions standing long or short on the commodity exchange like any other traded commodity, stock or currency. The basic mechanism of price discovery (based on demand and supply for actual use) of anything traded on an exchange has been terminally infected by speculators having access to unlimited funds and super fast computers for trading leading to volatile price swings. This has been made worse by the launch of ETFs for anything and everything under the sun by the financial community. The price of everything including Gold is likely to suffer when the speculators unwind their positions due to some event that they have not anticipated or foreseen.

Shelby Moore 19 Jan 11, 20:01

fiat will die, gold will not Akhil commented: "The price of everything including Gold is likely to suffer when the speculators unwind their positions" Exactly the opposite actually, the entire fiat system is being held up by the apparency of liquidity between worthless (bankrupt) casino chips (e.g. dollars, pounds, etc) and the real money to which they are no longer have a fixed convertibility since 1970. I suggest you read both of my comments at the following link: http://www.marketoracle.co.uk/Article25637.html#comment98745 And I suggest you search on "Shelby Moore" at the search box on this site. For example, the physical demand for investment silver is increasing exponentially: http://goldwetrust.up-with.com/t33p285-silver-as-an-investment#4067 Whereas, there is a 3.5 billion ounce inherent naked short in physical silver that is holding up the fiat system on the pin of a needle. Read all of my comments at this blog page to know the truth about that: http://seekingalpha.com/article/241152-jp-morgan-and-the-massive-silver-short-the-greatest-story-ever-told Akhil, it is race between you and your fellow bankrupted westerners to understand and obtain some PHYSICAL gold and silver before the lights go out on the fiat casino. Only a few can find a chair, because there isn't that much available, as compared to the quantity of casino money. The short-term volatility of the fiat conversion price, is not indicative of gold and silver losing their role as real money, but rather evidence that the current untethered fiat system is in its end game as profligate socialism debases it towards its intrinsic value of ZERO (as has been repeated 599 times throughout recorded human history). Look for example at silver, which plummeted from $21 to $9 and recently got back up to $31. We have silver up from $4 to $30 in 7 years, or +33% per annum. Have any of your total portfolios gains +33% per annum for the past 7 years? No! None of you, not even Nadeem have accomplished that. That is prove enough, that the game is over. Figure this out before it is too late for you. It is every man for himself now to get off the Titantic fiat system which is sinking fast. How fast? Silver +33% per annum for 7 years. Very, very few people own physical yet. Maybe 1/10 of 1% own silver. You had better get yours before that becomes 1% of the people, because there isn't that much physical available.