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Gold New All Time Highs on Frantic Save-haven Demand

Commodities / Gold & Silver 2009 Jan 26, 2009 - 09:25 AM GMT

By: Adrian_Ash

Commodities

THE SPOT PRICE OF PHYSICAL GOLD remained volatile in London on Monday morning, reaching new all-time highs for UK and Euro investors but retreating from new 15-week highs against the US Dollar.

Trading at $900 per ounce, Spot Gold began the week almost 9% above last Monday's New York opening after breaking out of its 10-month downtrend vs. the US Dollar late on Friday.


Asian stock markets slipped meantime, while European equities recovered a third of last week's 4% drop.

Crude oil held flat below $47 per barrel. German Bund and US Treasury bonds ticked lower, pushing their 10-year yields up to 3.28% and 2.66% respectively.

"US credit spreads narrowed on Friday," notes Walter de Wet for Standard Bank in Johannesburg, but "although this indicates diminished investor risk aversion, equity index futures are pricing in more downside in the US today.

"Investors could remain cautious, therefore, which could anchor precious metals – especially gold."

"Gold is the obvious shelter for safe-haven investors right now," agrees today's Gold Market note from Mitsui, the London-based precious metals dealer, "and the racing drive of buying interest has pushed the Gold Price to record levels in a host of non-dollar denominated currencies."

Today the Pound Sterling failed to hold a 3¢ jump to $1.3850, supporting the Gold Price in Sterling near a new record high – hit overnight – above £662 per ounce.

The European single currency meantime ticked below $1.30, pushing the Gold Price in Euros up to a new record high above €700 an ounce.

In terms of the old German Deutsche Mark, gold this morning hit its third-highest Gold Fix in history, equivalent to DM 44,461 per kilo.

That was just 4% shy of the levels hit either side of the 20-21st January weekend in 1980 – the 28-year peak for US investors broken when Bear Stearns collapsed in March last year.

"Of course," Mitsui continues, "steep moves to the upside can lay the foundation for an equal move to the downside. There is a distinct possibility [that] the return of scrap selling will add pressure."

But looking ahead for Gold in 2009 , "So many bullish factors have aligned to propel gold to higher territories," Mitsui adds, "the action of investors will determine gold's fate over the coming days."

In particular, the fact that last week saw gold "continue its appreciation drive in the face of persistent Dollar strength is a unique event, and only serves to strengthen gold's bullish argument."

This morning in Tokyo – where the Nikkei 225 index slipped 0.8% – Tocom Gold Futures for settlement in Dec. 2009 rose 5.5% vs. the Yen, nearing a 3-month high at ¥2,600 per gram.

New data released after Friday's close also showed the outstanding volume of US Gold Futures & options growing for the sixth week running, swelling by more than 22% from the two-and-a-half-year low hit in early Dec.

Bearish bets held by the "smart money" of gold refiners, wholesalers and bullion banks – traders in the business of selling gold, who are always more short than long as a result – have risen by almost one-third since then.

Bullish betting by hedge funds and other "large speculators", in contrast, has grown by 39%.

The latest survey of professional gold traders and analysts from Bloomberg News is "the most bullish ever", says the newswire today, with 28 out of 31 respondents "predicting gains as investors seek a haven from economic turmoil."

Bloomberg's weekly survey has proven accurate some 59% of the time since it was launched in April 2004.

Longer-term for Gold in 2009 , the London Bullion Market Association's latest Gold Forecast shows that "Contributors expect gold to be the only [precious] metal to finish with a higher 2009 average of $881 – some $30 above the price of early January 2009."

Last year's LBMA Forecast averaged $865 an ounce, less than 1% shy of the final figure.

Winner of the 2008 Forecast with an exact call of $872 per ounce, Frederic Panizzutti of MKS Finance in Geneva now sees the Gold Price averaging $901 in 2009, ranging from $720 up to $1,180 an ounce.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
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 2009

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

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