-- Posted Thursday, 14 June 2007 | Digg This Article
from Adrian Ash
BullionVault
07:05 ET, Thurs 14 June
SPOT GOLD PRICES moved sideways in Asian and early London trade Thursday, holding above the $650 level reached at last night's US close.
In Tokyo gold futures for April '08 closed the day ₯31 higher per gram, a rise of 1.2% from Wednesday. But a sharp fall in the Yen, down to a fresh four-and-a-half low versus the Dollar, capped the US-equivalent price at $657 per ounce.
The Nikkei stock index also rose, gaining 0.6% even as US Treasury bond yields ticked higher again after yesterday's pullback to reach 5.22%, threatening to raise the price of money worldwide.
"As long as long yields aren't making a run for higher levels, it makes sense that people are dipping their toes back into stocks again," reckons David Bianco, chief equity strategist at UBS in New York.
By the London Morning Gold Fix at $650.10 per ounce up more than 1% from Wednesday's AM Fix the FTSE All-Share stock index had gained 0.8%. In Frankfurt, Germany, stocks leapt higher on steady inflation data at 2% annualized for May. Rising 1.5% by lunchtime, the Dax outstripped even the Dow Jones's overnight gains on Wall Street.
US stocks put in their best one-day performance since July on Wednesday as data showed Retail Sales growing twice as fast as forecast in May. The Federal Reserve's latest Beige Book a round-up of the number and reports studied by US interest-rate policymakers also added to the Dow's rally by noting that "hiring activity picked up" from late April onwards, but "wage pressures do not seem to have increased."
What could be better than a growing economy free from rising prices if only according to the official inflation data? All eyes are now on the US Producer Price Index, due out at 08:30 New York time. Running at a 3.2% rate in April, inflation for US manufacturers is forecast to have reached 3.6% last month.
Friday morning then brings US Consumer Price data and with Wall Street expecting a 0.6% rise from April's 0.4% month-on-month rate, "the bond market is very sore," reckons Paul Mortimer-Lee, chief market economist at BNP Paribas.
"We've had a lot of news, big packets of news that forced the market to sell off.
"Any more bad news like stronger growth, higher inflation will make the bond market back off some more."
Should investors expect the gold market to back off on rising inflation data, too? Looking at the technical picture for spot gold prices, "gold is walking a very thin tightrope," reckoned one Tokyo trader speaking to Reuters earlier today.
"What might come to the rescue," says Wolfgang Wrzesniok for Heraeus, the German refining giant, "is a possible sharp increase in physical demand as a result of the now much lower prices.
"Should that materialize, the metal might have a chance to shrug off the overhanging threat and stay instead in a range between $635 and $675 an ounce."
This morning's action in India, however the world's largest single gold market, and the destination of one ounce in every 5 sold worldwide last year says that bargain hunting has yet to overcome seasonality. Prithviraj Kothari, director at Riddisiddhi Bullion in Mumbai, says that that "demand is very slow." He doesn't see Indian gold demand for jewelry fabrication picking up until the autumn wedding season draws near.
But longer-term, Indian demand for gold remains strong despite the price of gold doubling against the Rupee in the last six years. Gold imports rose by 50% during the first three months of 2007 compared to Q1 2006, said the World Gold Council yesterday. The key festival of Akshaya Thrithiya in April saw gold sales to private consumers hit 60 tonnes, versus 32 tonnes sold during the 2006 festival. That helped to push total Indian gold imports up to 211 tonnes during the three preceding months.
And despite the record gold price in Rupees achieved last year, physical gold imports slipped only 1% in volume terms, said the WGC.
If you'd like to buy physical gold bullion now, taking advantage of the current pullback before the next Indian wedding season begins in late summer, be sure to visit BullionVault.com today.
Adrian Ash
BullionVault
Gold price chart, no delay | Gold prices live | Latest gold market news
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 BullionVault where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2007
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-- Posted Thursday, 14 June 2007 | Digg This Article
