-- Posted Thursday, 25 October 2007 | Digg This Article
| Source: GoldSeek.com
London Gold Market Report
from Adrian Ash
BullionVault
08:10 EST, Thurs 25 Oct.
SPOT GOLD PRICES continued to rise during the Asian and early London sessions on Thursday, holding above $767 per ounce just ahead of the US open a gain of 1.5% from yesterday's start in New York.
"Speculative interest [in the Comex gold futures market] remains strong, with many investors seeking alternatives to their Dollar exposures," notes David Thurtell at BNP Paribas.
"We expect a correction over the coming month, though good support should emerge at the $750 mark.
"Gold has held above the $760 mark as the Dollar remains weak and oil prices surge back close to record levels.
Crude oil rose for the second day running this morning, with Brent crude traded in London hitting a new all-time high above $85.50 per barrel.
US light crude for Dec. delivery rose by 1.4%, while the Gold Market for immediate delivery recorded an AM Fix of $765 per ounce in London, the highest price set for the bulk of commercial gold dealing since Friday.
But the link between crude oil and Gold Prices remains weaker than many investors and analysts believe.
Based on the last 3 years of weekly prices changes, notes the World Gold Council in its latest Gold Investment report, the correlation between gold and oil rose to 0.37 this summer, up from 0.36 in spring '07 and well above the 0.21 correlation recorded in the third quarter of 2006.
A perfect connection, however, would show a correlation of 1.0.
Gold Prices also displayed a greater correlation with the broad commodities market (0.47 vs. the CRB Index; 0.58 vs. the DJ AIG Commodities Index), and gold's correlation with crude oil was not much greater than its apparent link to high-yield bond prices.
(Want to know What's Really Driving the Bull Market in Gold? To download this free report now and claim a gram of free gold stored in Zurich, Switzerland Register with BullionVault here...)
On the economic front, meantime, the US earnings season rolls on today, with results due today from Black & Decker and Motorola before the opening bell. Microsoft, the software giant, will report its Q3 numbers after the close tonight.
But all eyes are on the official US housing data, showing the number of new homes sold in Sept., due at 09:00 EST.
Preceded by the Durable Good Orders report also for last month the New Home Sales figures are expected by professional analysts to show a 2.5% drop from August.
Yesterday's data for Existing US Home Sales, however, recorded a shock 8% plunge. Sales dropped to the lowest volume for more than 7 years.
"The Dollar remains under pretty broad-based pressure," reckons Russell Jones, head of fixed income & currency research at RBC Capital Markets.
"It's increasingly likely that the Fed will move next week. There is growing speculation that it could even cut 50 basis points [to 4.25%] and the fallout in the financial sector seems to be quite grim, too."
Merrill Lynch, the largest US brokerage, yesterday extended its third-quarter write-downs by $2.4 billion to $5.9bn thanks to losses on subprime and related-housing bond losses.
Here in London, Shell plc the largest oil company in Europe said underlying profits dropped by 8% between June and Sept., but it still beat analyst forecasts.
That helped the FTSE100 index shoot 1.3% higher by lunchtime, despite news that UK mortgage approvals fell by more than one-quarter last month from Sept. '06.
The British Pound also shook off the weak UK housing data, spiking above $2.0530 even after the Bank of England warned that "the financial system remains vulnerable to further shocks" following the turmoil that forced a bail-out of Northern Run the first UK bank to suffer a run by anxious savers since 1878 in early Sept.
The US Dollar also pulled back for the third day running against the Euro, sending the single currency above $1.4300, last week's first record high.
Gold Priced in Sterling rose to a 3-day high above £374.50. For Eurozone investors wanting to Buy Gold Today the metal touched 537 per ounce, its highest level since the 17-month highs hit on Friday last week.
"While physical demand [for gold] has no doubt tailed off, it certainly has not disappeared and is very apparent on market dips," says the latest Refining Monitor from Mitsui, the international bullion dealer:
"It is important the physical community have sufficient time to adjust to a new Gold Price, in a similar manner to their acceptance of the mid-$600s last year."
The Monitor notes that Indian demand for gold was "constrained" in Sept., despite the Rupee rising to cap gold's surge against the US Dollar. "As a consequence of higher Gold Prices," the report goes on, "many refineries reported a notable increase in scrap metal returning to the market."
But looking ahead, "jewelry manufacturers are nearing their busiest period as the year-end holiday season approaches in India," say Mitsui's analysts. "In addition, we are just over 2 weeks away from the festival of Diwali, which is a very auspicious time for Indians to buy gold."
Adrian Ash
BullionVault
Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
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 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, 25 October 2007 | Digg This Article | Source: GoldSeek.com
