Gold Rises to 4 Session High as Global Equities Rally
Commodities / Gold & Silver Apr 07, 2008 - 09:21 AM GMTBy: Adrian_Ash
GOLD PRICES jumped to a four-session high above $918 per ounce in London trade early Monday, rising 0.5% from last week's close as crude oil rose 1% and world stock markets ticked higher.
"With the US Dollar continuing to weaken and crude oil pretty well supported, there's a need for an inflationary hedge and more people are shifting to commodities including gold," said Ellison Chu, the head of precious metals trading for Standard Bank Asia in Hong Kong, to Bloomberg this morning.
But for short-term direction, "there are no fresh data cues until the Federal Reserve [policy] minutes on Tuesday," notes Kishore Narne of Anand Rathi Commodities in Mumbai.
Notes from the Fed's last policy meeting – when it cut Dollar interest rates by 0.75% – are due at 13:00 EST tomorrow. Thursday brings new interest-rate decisions from the European Central Bank in Frankfurt and the Bank of England in London.
But caught between rising inflation and the global banking crisis – which now presents an "evident" case for public intervention according to Dominic Strauss-Kahn, head of the International Monetary Fund – neither the ECB or BoE is expected to change the cost of money.
"Gold Prices at this level represent good value and I do think we are going to see more demand from Asia," reckons Jonathan Barratt, head of Commodity Broking Services in Sydney.
"For kilo bars, we are seeing a shortage and a premium running at about 40 cents per kilo [in Asia] and we anticipate that to move up to 75 cents in the next few months."
Today the Australian stock market added 0.3% despite a broad rise in Asian-Pacific stocks after the country's third-largest bank, ANZ, sank on news it had to raise bad-debt provisions by 71% in the six months to end-March.
On the data front, Australia's exports fell 4% and imports were unchanged in Feb. from Jan., taking the country's trade deficit to A$3.29 billion (US$3bn). Analysts had expected only three-quarters that gap.
Tokyo gold futures meantime neared Monday's close up 1.1% at ¥3,042 per gram – equal to $922.65 per ounce for Feb. ‘09 delivery – as the Japanese Yen slipped back towards a three-week low on the currency market.
That also boosted Japanese export shares, pushing the Nikkei stock index 1.2% higher to a five-week high as brokerage shares also rose alongside metal and oil prices.
Hong Kong stocks rose 1.1%, helped by a 10% surge in Zijin Mining, China's largest gold-mining group. Today it announced a $1.4bn public offering on the Shanghai stock exchange – plus a further 10% enlargement of its Hong Kong listing – to raise funds for new acquisitions overseas.
Zijin had previously dropped 42% of its value since the start of 2008, falling sharply alongside the Hong Kong market despite a near 50% uplift in reported earnings.
Gold prices in India ticked lower to 11,840 Rupees per 10 grams – down from last month's new all-time peaks above R13,000 – as the Sensex measure of Bombay stocks added 2%.
A committee set up by the government's Planning Commission and chaired by former IMF chief economist Raghuram Rajan said today that the Reserve Bank of India should make controlling inflation its single objective.
The annual inflation rate rose to 7% in the week-ending 22nd March according to official data, the worst rate since Dec. 2004.
The Sensex remained almost 25% below its starting level for 2008.
European stocks rose 0.8% by lunchtime in Frankfurt after finishing their best week in more than 12 months according to Reuters data. Over on the currency markets the Euro recovered of an early one cent loss to reach $1.5700 on news of strong German industrial output in Feb.
The British Pound dipped almost two cents from Friday's high to reach $1.9870, pushing the gold price in British Pounds just above £462 per ounce. For French, German and Italian investors looking to buy gold today, the price reached its best level since Monday last week €585 per ounce.
Over in New York, meantime, the latest CFTC data showed professional and private investors sharply cutting their leveraged bets on gold market futures in the week-ending April 1st.
The net balance of bullish contracts held by gold futures traders dropped by 8%. April Fool's Day then saw world gold prices slump more than 3% to a 10-week low of $875 per ounce.
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 2008
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