Gold and Silver Break Bull Market Up-Trend
Commodities / Gold and Silver 2010 Feb 05, 2010 - 10:18 AM GMTBy: Adrian_Ash
THE PRICE OF GOLD slumped to a fresh 3-month low for Dollar investors at the start of Friday's trading in London, bouncing $10 higher to $1060 on news that the United States shed another 20,000 jobs last month.
Analysts had forecast a small increase in non-farm payrolls. The US has now lost 6.5 million jobs since Jan. 2008.
"Gold remains at the mercy of the Dollar [and] silver is looking to gold for direction," says Walter de Wet at Standard Bank.
"Major support levels were breached [on Thursday]," says another London dealer, "with gold and silver both passing below long-term trendlines dating back to August 2008."
Falling for the third day running on Friday, gold prices dropped as global stock markets sank once again, down almost 9% from January's 16-month high.
Both the Euro and Sterling fell for the seventh session in nine, falling to their lowest levels vs. the Dollar since May 2009.
Little changed on the week, US crude oil contracts fell below $73 per barrel after their worst one-day drop since July.
"Gold has suffered a massive loss [and] silver collapsed," says a technical analysis from Scotia Mocatta, "taking out all near-term levels of support.
For gold prices, "1050 may hold a bit of support ahead of 1025," says the bullion bank, "but one should avoid catching a falling knife at this point."
New York's SDPR Gold Trust fund (GLD) yesterday shed 10 tonnes of the bullion backing its shares – the sharpest divestment since mid-Dec. at 0.5% of the total stock, held at HSBC bank vaults in London.
In Hong Kong this morning – and ahead of next week's typically strong gold demand for the Chinese New Year – "Physical business was disappointing and gold rebounded mostly on the back of recovering Euro," said one dealer.
Over in India, in contrast – formerly the world's No.1 private gold consumer, where demand has collapsed since the global financial crisis began – "People are buying at all levels," said a senior jewelry dealer to the Platts news service.
"In India people love gold and are very conscious of buying on dips."
"Demand is still coming in but not in big lots as it did yesterday," Reuters quotes a Mumbai bank dealer who sold 0.4 tonnes of bullion on Thursday.
"I have orders in lots of 10 and 40 kilos between $1045 and 1050," said another Indian bank dealer.
Back in European dealing on Friday, government bond yields fell to an 8-week low as prices rose, hitting 3.59% on 10-year US Treasuries and 3.12% on German Bunds.
Japan's Yen eased back from Thursday's 8-week high on the forex market vs. the Dollar, but extended yesterday's surge vs. the Euro, reaching a fresh 11-month high more than 4% above Wednesday's finish.
New data said Germany's industrial output sank in Dec., sagging 2.6% from Nov. against analyst forecasts of a 0.8% rise.
UK factory-output prices then leapt in Jan., the Office for National Statistics said, jumping 3.8% from the start of 2009 but badly lagging the 8.4% jump in factory-input costs.
The gold price in Euros edged down to €770 an ounce, a two-week low almost 4.5% beneath Wednesday's near-record peak.
UK investors wanting to buy gold today saw the price slip to a one-week low beneath £670 an ounce, some 7% below last month's near-record highs.
"It might have to get worse before it gets better," said Paul Mortimer-Lee, head of Market Economics at BNP Paribas in London to Bloomberg this morning, commenting on this week's Greek budget proposals and the ensuing sell-off in Euros.
"Something has to happen to turn credibility around. The market's just saying it's not believable."
Tax collectors in Greece today began a 48-hour strike over the Athens' government's new austerity program, which starts with a public-sector pay freeze.
European Central Bank president Jean-Claude Trichet attempted on Thursday to calm fears of either a Greek default, German-paid rescue, or exit from the 10-year single currency project.
But Trichet "did not convince me" says $100bn fund manager Stuart Thomson at Ignis in Glasgow, Scotland.
"Where does he think the Greek, Spanish and Portuguese economies will be three years from now? Their austerity measures will weigh on the Euro area as a whole."
Eurozone policy-makers today headed for the G7 meeting of rich developed-world leaders in the Canadian Arctic, but "Clearly the G7 is not the power it was," writes Steven Barrow, chief currency strategist at Standard Bank in London.
"That's been transferred to the G20."
Noting Eurozone and Japanese complaints that China's Renminbi currency is unfairly pegged to the US Dollar, hurting export competitors, "It's more fair to debate the Yuan at the G20 instead of G7 meetings," said Tokyo finance minister Naoto Kan to reporters this morning.
"We think it is inevitable that the global policy debate will move on from the behavior of banks to the behavior of countries in the global currency system," says Barrow.
"Over time, that still implies the ascendancy of currencies like the Renminbi – and the Euro – and the demise of the Dollar, despite the fact that the Dollar is clearly in the ascendancy right now."
By Adrian Ash
BullionVault.com
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Formerly 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 2010
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