Gold Falls in Dollars But Hits New High in Sterling as Greeks Hoard Bullion
Commodities / Gold and Silver 2011 Jun 22, 2011 - 08:07 AMBy: Ben_Traynor
THE SPOT MARKET Dollar gold price fell to $1542 per ounce late Wednesday morning in London – still a touch above where it started the week, and 2.2% off last month's record high – while commodities fell and stocks were mixed after Greece's prime minister survived a confidence vote.
Silver prices fell below $36 per ounce – 28% below April's record high.
"Spot gold has bounced off the 2011 uptrend line at $1521.81 last week," says Axel Rudolph, senior technical analyst at Commerzbank.
The gold price is, however, "being capped by the two month resistance line at $1543.29 and, more importantly, the current June high at $1554.10," says Rudolph, whose "short-term bearish view will remain in place".
"Approaching the resistance level, we can say gold is a bit cautious," adds Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"But overall, there are still bullish signs because there's a lot of mess around the world, which can't be solved."
Greek prime minister George Papandreou survived a vote of confidence Tuesday night. The Greek parliament is due to vote on a €78 billion austerity package on June 28.
"I suspect further volatility and uncertainty lies ahead...we're still a long way from a resolution of this issue," says Stephen Halmarick, head of investment markets research at Colonial First State Global Asset Management in Sydney, which manages $150 billion.
"Nothing has been done to enhance growth [in Greece]...no single indicator has shown strength," said Mohamed El-Erian, chief executive of the world's largest bond fund PIMCO, on Wednesday.
"For the next three years, we're going to see different economies work out different problems. For European economies, especially Greece, it would be through default."
The Financial Times reported Tuesday that Greeks are emptying their savings accounts and buying gold in preparation for a banking crisis.
"When the global financial crisis started, our sales of coins to investors overtook bullion for the first time,” says Greek precious metals dealer Harry Krinakis. "Now the sales ratio has reached five to one."
One computer technician has swapped his Euro savings for gold coins , the FT reports.
"I keep them at home just like my grandmother did in the Second World War."
Over in China, rising demand for gold coins has led the central bank to increase its issuance of the commemorative 2011 Panda coin .
Chinese inflation climbed to 5.5% in May, and is expected to rise further.
"The overall level of prices remains high and inflation will remain elevated for some months," China's National Development and Reform Commission announced on Wednesday, adding that it believes "the overall situation is controllable".
"Inflation is going to be stubbornly high in 2011," reckons Tim Condon, Singapore-based head of Asia research at ING.
"It's largely a food story," says Condon, who adds that the authorities may be reluctant to tighten monetary policy because of "the risk that the economy slows down too much".
Here in the UK, meantime, the Pound Sterling gold p rice spiked to a new all-time high of £958 per ounce following Wednesday morning's publication of the latest Bank of England Monetary Policy Committee minutes.
The minutes showed that only two MPC members voted to raise interest rates from their 0.5% level, compared the 3 members at May's meeting.
The latest meeting was the first since the departure from the MPC of Andrew Sentance, who voted for a rate rise at every meeting since June 2010. Ben Broadbent, who replaced Sentance, voted to keep rates on hold.
"Currently the market sees no hike until the second half of 2012," reckons Jane Foley, senior currency strategist at Rabobank in London.
By Ben Traynor
BullionVault.com
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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
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