Daily London Gold Market Report - A Chance to Buy the Dip

By: Adrian_Ash

GOLD RECOVERED an overnight dip in Asia during the first half of London trade Friday, reaching back above $668 for the fourth time in two days as the US open drew near.

"Sentiment is definitely firm at the moment given the consistent record highs we are seeing on the Euro," says Brandon Lloyd for Mitsui.

"It wouldn't be surprising at all for gold to reach its next target in the mid-$670 area tonight. If the US Dollar does manage to find the strength to recover some of its losses, then gold should find support at $660."

Data from StreetTracks GLD, the world's largest trust-based gold fund, showed net holdings up 4.4% from a month earlier, the first such gain since April.

"The recent weakness was a temporary dip and opportunity to invest in gold and gold-exposed stocks," reckons David Coates, an analyst at Ambrian Partners in London . "We have a fairly bullish outlook on gold."

The rising Gold Price came alongside sharp gains in world equity markets. The FTSE in London rose towards a 7-year high on bid talk; Wall Street neared the US open flat after Thursday's fresh all-time record highs; the Nikkei in Tokyo earlier rose 1.2%, while Tocom gold futures for April '08 added 0.8% for the day.

"Funds have been attracted into the Gold Markets because they are in an uptrend and that gives them an opportunity to make some money," said Richard Davis, head of natural resources at Merrill Lynch, to Reuters. "These funds are making the markets more volatile.

"Our view on gold is very positive going forward. Investment demand is growing and that is important because investment demand is the only thing which has driven a bull market in gold."

In the currency markets the Japanese Yen fell to a new all-time record low against the Euro, while the Dollar at $2.0350 per Pound. That capped the Sterling price of gold below £329 per ounce for British investors wanting to Buy Gold today, some 0.8% above last Friday's close.

The Euro also held steady against the Dollar, trading at $1.3782 by late-lunchtime in Frankfurt . That held the Euro price of gold below €485 per ounce, just more than 0.6% higher for the week.

In the bond market, meantime, US Treasuries were little changed – with the 10-year yielding 5.12% – ahead of the US retail, inflation and consumer sentiment data due at 08:30 EST.

US Export and Import Prices for June will be released alongside Retail Sales for last month, plus Business Inventories for May and the current month's reading on the Michigan Consumer Sentiment Index.

Wall Street forecasts signs of a US slowdown in all these releases. Anything other a marked drop in retail sales could spark a rally in bond yields, potentially giving investors yet to Buy Gold the chance to buy on a dip.

By Adrian Ash
BullionVault.com

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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 2007

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