-- Posted Thursday, 6 May 2010 | Digg This Article | | Source: GoldSeek.com

London Gold Market Report

THE PRICE OF WHOLESALE GOLD broke new all-time highs for Euro and UK investors at Thursday's AM Fix in London, hitting new 5-month high against the Dollar as global stock markets extended this week's near-5% losses.

 
British voters looked set to elect a "hung parliament", with no single party in clear control.
 
The European Central Bank – which on Monday was forced to accept "junk-rated" Greek government bonds as collateral for commercial-bank loans – defied market and analyst expectations by voting to keep Euro interest rates on hold at 1.0%.

The 16-nation Euro currency sank on the news, reaching a new 14-month low vs. the Dollar and dropping almost 5% from Monday's starting level to hit $1.2720.

"Judging by the recent acceleration [in gold] there is no reason to doubt that the major €1000 level will at some stage be reached, probably in the course of this year," says Commerzbank's Axel Rudolph in his latest technical analysis.

"We remain bullish as long as the gold price in Euros trades above the March low at €800.42."

Today the gold price in Euros reached €928 an ounce – some €29,830 per kilo.

Higher by more than one-fifth from the start of 2010, that's 25% above gold's all-time peak vs. Germany's pre-Euro Deutsche Mark, reached by the sharp spike of Jan. 1980.

Across the border in Switzerland today – where the Franc was formally backed by gold bullion reserves held at the Swiss National Bank until 10 years ago – investors saw the price of gold rise within 2% of its 1980 high.

Rising 15% from New Year's Day, the price of gold in Swiss Francs touched CHF42,390 per kilo.

"The two-day range in [Dollar gold] of 1158 to 1192 is impressive," says the latest technical analysis from bullion bank Scotia Mocatta.

"We believe the risk remains higher, and will only shift neutral on a close back below the former 2010 high of 1161.

"The top of our channel comes in at 1199 followed by record high 1226."

Over on the debt markets, meantime, G7 government bond prices eased back from Wednesday's multi-month highs, nudging the yield offered to new buyers upwards.

Ten-year US, UK and German bond yields rose to 3.57%, 3.82% and 2.88% respectively.

The government of Spain yesterday sold €3 billion of new 5-year bonds for twice the interest-rate costs paid by comparable German Bunds.

Wednesday also saw the US Treasury reduce its debt issuance plans for 2010, cutting about 5% of its planned auctions of 3-year and 10-year bonds but leaving total issuance forecast around $1.4 trillion.

Freddie Mac, the tax-payer-financed home-loan giant, meantime asked Washington for an extra $10.6bn injection, following a net loss of $6.7bn between Jan. and April.

"While contagion fears persist, gold should remain well supported," says a note from Morgan Stanley's New York analysts.

"Gold will become more and more of a safe haven. People just want safety," agrees David Thurtell at Citigroup in London, speaking to Bloomberg by phone.

Crude oil today crept back above $80 per barrel, but remained near 6-week lows.

Silver prices – hit by "liquidation" from institutional investors according to several bank analysts – failed to rise through $17.80 an ounce after falling Wednesday to a 5-week low at $17.08.

Adrian Ash

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK's leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen's Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

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.

-- Posted Thursday, 6 May 2010 | Digg This Article | Source: GoldSeek.com

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