Gold Sold to Raise Cash as Tsunami Hits Stocks and Oil
Commodities / Gold and Silver 2011 Mar 11, 2011 - 09:49 AM GMTBy: Adrian_Ash
THE PRICE of gold held at 10-session lows against the Dollar in London on Friday as world stock markets fell – and the US currency rose – after a powerful tsunami hit the Japanese coast north of Tokyo.
Japanese savers saw gold prices fall hard, losing 2.6% from this week's new three-decade highs, despite a drop in the Yen.
Trading 2.4% below Monday's new Dollar record near $1445 per ounce, prices to buy gold held flat from last week's finish for Euro and Sterling buyers.
At big institutions, "[Managers] like gold because they can sell it easily to raise cash to defend positions elsewhere," said economist and editor of the eponymous investor letter Dennis Gartman to Bloomberg.
"They will be doing so today.”
But "I suspect Japan won't be a major market mover today for gold prices once the initial impact wears off," reckons Tom Kendall at said Credit Suisse, speaking to Dow Jones Newswires.
"Gold's focus is likely to remain the Middle East and whether there are any sizeable protests in Saudi Arabia."
The world No.1 oil producer's "day of rage", however – called for by internet activists – instead left the capital Riyadh quiet and heavily policed, press reports said.
Pro-Gaddafi forces in Libya claimed to have re-taken the key oil port of Ras Lanuf. Some 13 Christians were reported killed in Egypt after protesting the destruction of a church by "a Muslim mob".
Over in Tokyo, where the Nikkei share index closed Friday 1.7% lower, the Bank of Japan promised "ample" liquidity and set up an emergency task-force to support banking operations. Interest rates are already at zero.
European stock markets meantime extended this week's drop to hit 3-month lows, and oil prices also fell further, but copper stemmed its worst weekly drop since June.
Silver bullion fell 7.1% below Monday's new 3-decade highs, trading at a 6-session low of $34.50 per ounce.
"Gold buying opportunities [are] on the horizon," says Standard Bank's latest Precious Metals Monthly, prepared by London's GFMS consultancy.
This week's new Dollar records came from "very strong physical demand in the major physical buying regions, fanned by a combination of inflationary fears and political tensions," says the report, with Western savers also raising their gold investment again.
"There have been signs of some profit taking and scrap sales, but the market remains tight...High global liquidity points to further medium-term gold price increases."
Steady gold accumulation continues amongst emerging-market investors, says the latest analysis from French bullion bank Natixis, "in contrast to western and Middle East investors who have been buying gold as a reaction to the North African situation."
China's new Lion Gold Fund – allowed in Jan. to put $500m of Chinese investors' money into gold-backed trusts overseas – this week received a licence to double that exposure.
Neighboring Vietnam's communist government on Thursday stopped issuing Gold Trading licenses, and vowed to ban gold-denominated bank accounts – now holding some $5.4 billion for Vietnamese savers hit by 12% inflation and repeated devaluation's of the Dong currency.
"Gold and silver prices [will also] benefit from...a re-emergence of worries about peripheral European sovereigns," says Natixis.
Greek and Portuguese bonds fell hard once again on Friday, driving new borrowing costs up towards new Euro-union highs, as Eurozone leaders met in Brussels to discuss the European Stability Mechanism (ESM) – the planned replacement for €500 billion European Financial Stability Facility (EFSF) created amid the Greek and Irish debt crises of 2010.
"The most common question we've had all week," says Deutsche Bank's Jim Reid, quoted by the FT's Alphaville, "has been why are markets so sanguine about the continued deterioration in the European peripheral market?
US Treasury bonds rose fast on Friday, nudging 10-year yields down to new 2011 lows near 3.36% as stock markets sank, despite this week's news that giant bond-manager Pimco has cut Washington's debt from its flagship fund entirely.
"[Pimco's move] seems a bit extreme but there's no doubting that the market faces headwinds," says Steve Barrow at Standard Bank, "which is one reason why we feel that 10-year yields will be above 4% by the end of the year."
Rising yields on government bonds mean that bond-prices are falling.
By Adrian Ash
BullionVault.com
Gold price chart, no delay | Buy gold online at live prices
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 2011
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