Gold and Silver Buy the Dips

By: Adrian_Ash

WHOLESALE gold prices in US Dollars dipped beneath $1760 per ounce for the 3rd time this week in London on Wednesday morning, gaining against the Euro and Sterling as those currencies fell faster and rising back towards last week's new all-time high versus the Swiss Franc.

World stock markets extended Tuesday's late plunge in US equities, knocking 2.4% off the French CAC40 index as the Euro dropped to a 2-week low beneath $1.2850.

After anti-austerity protesters clashed last night with police in Madrid, a general strike in Greece brought the country "to a standstill" according to BBC reports, with tens of thousands of people gathered outside parliament in Athens.

Commodity prices fell, with crude oil dropping to a 7-week low.

Silver bullion held below $34.00 per ounce, trading just above Tuesday's 8-session low.

"It's bullish when gold goes up in other currencies than the Dollar," Bloomberg today quotes Mitsubishi Corporation's precious metals strategist Matthew Turner, "because it means it's a fundamental story rather than a currency issue.

"We've been waiting for QE3 in gold for over a year now and now it's happened."

US central banker Charles Plosser, president of the Philadelphia Federal Reserve, warned Tuesday that the Fed's new monthly purchases of $40 billion in mortgage debt are "unlikely to see much benefit to growth or employment."

"Plosser threw a wet rag on hopes that the Fed's quantitative easing would stimulate the US economy," says Marc Ground at Standard Bank in London.

"[But the] accommodative monetary policy stance from the Fed will support precious metals, particularly gold and silver, well into 2013."

Analysts at Bank of America-Merrill Lynch also "remain secular bulls on gold," says technical strategist Stephen Suttmeier, adding that "The breakout above the year-long downtrend line completes the correction within the longer-term uptrend.

"Gold prices point to a stronger rally to $2050-2300 and up to $3000 longer-term."

Last week, Suttmeier's BAML colleague MacNeil Curry – head of foreign-exchange technical strategy – told CNBC that he sees gold hitting $3000 to $5000 an ounce, but "not in the next few months."

On the demand side, "Physical demand still remains fairly limp presently," says today's note from Swiss refiner and financiers MKS's Australian dealers, "and there is certainly an increase in scrap this month which is skewing physical flows to the downside.

"The one respite is that typically Q4 shows a bounce back in physical demand following summer holidays [as the] Chinese and Indian gift giving and festival season begins."

Gold prices in India – where mid-November's Diwali festival will mark the typical gold buying peak for the world's #1 consumers – today edged higher by 0.3%, the first such rise in a week according to Bloomberg but only 2.5% off this month's new record highs.

Central banks "are likely to continue to buy gold for the remainder of this year," writes Eugen Weinberg, head of commodity research at Commerzbank in Frankfurt today, "thereby stripping supply from the market and contributing to climbing gold prices."

Gold is "currently also finding support from concerns about supply in South Africa," says Weinberg of the world's former #1 producer, still sitting on the biggest underground reserves.

"Strikes [by miners] are now concentrated on the gold industry, while the platinum industry has recently calmed down again."

The world's 4th largest gold mining firm, Gold Fields, said Tuesday that workers remained on illegal strike at two of its South African mines, "ignored the agreement reached Friday night," according to a spokesman.

World No.3 listed miner AngloGold Ashanti said Wednesday morning that illegal strike action at its Kopanang mine had spead to involves "most" of South African workforce.

Holding the world's second-largest unmined gold reserves, however, Russia could accept tenders to work Siberia's Sukhoi Log, the country's biggest untapped gold deposits – "in the near future" said deputy prime minister Arkady Dvorkovich, speaking at Reuters Russia Investment Summit in Moscow Tuesday.

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 2012

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