Gold Jumps on Physical Shortage as Coin Orders are Refused
Commodities / Gold & Silver Nov 21, 2008 - 09:27 AM GMTBy: Adrian_Ash
THE SPOT PRICE OF GOLD jumped to a one-month high at the US opening on Friday, heading for their third weekly gain on the trot as a rally in Asian stock markets failed to stick in Europe.
US equity futures bounced hard after sinking to an 11-year Low on the S&P Index at Thursday's close. Crude oil dipped below $50 per barrel.
"A weaker US Dollar and stronger crude stimulated buying interest in gold," says Friday's note from the Hong Kong office of Mitsui, the precious metals dealer.
It also reported trading-room rumors of the US Federal Reserve "holding an emergency meeting about Citibank."
The Western world's largest financial institution, Citigroup saw its stock price slump 26% on Thursday despite a planned $250m injection from Saudi prince Alwaleed Bin Talal, its largest single investor.
"The sentiment is still there that actually gold is a solid investment," reckons Carlos Sanchez, an analyst at CPM Group in New York, speaking to the AP newswire, "and that it has more of a price appreciation potential than other investments."
Following this week's news of a record jump in third-quarter Global Gold Demand , "the early indications are you could have a big increase in Q4," said Marcus Grubb, managing director of the World Gold Council's investment research and marketing division to Reuters at a conference in Singapore today.
"Certainly the initial indications on jewelry demand for [last month's Hindu festival of] Diwali were very positive. So we think, certainly the first half of Q4 looks pretty good."
With Indian Gold Prices rising strongly this week, "demand has come down in the last two days as prices have moved above 12,000 rupees per 10 grams," said one Mumbai bullion-dealer to Reuters earlier.
"Wedding demand is still there," said another private-bank dealer, "but if prices fall below that level we could see heavy buying."
Amongst Western gold investors – particularly in the US and Europe – the ongoing surge in demand has forced Western Australia's Perth Mint to stop taking new orders for small bars and Gold Coins until January, said sales and marketing director Ron Currie to The Australian newspaper on Friday.
"We have never seen this before and are working right at capacity," he told the paper, with his staff working 24/7 to meet outstanding orders. ( Want to beat this global Gold Coin Shortage ? Learn how here... )
Meantime in the broader financial markets, a new report from Banca Leonardo says Italy's top 10 banks will need a bail-out package worth €21.2 billion.
Economic activity in the 15-member Eurozone declined in Oct. for the sixth month running, according to the PMI purchasing managers index of both manufacturing and services.
Consumer prices in Canada showed their fastest one-month drop since 1959 in Oct., the official data agency said today, led by a 13.4% drop in gasoline prices.
Here in London, consensus forecasts now put UK government borrowing at 6% of national income over the next financial year, but after Thursday's news of a record Oct. deficit costing £140 billion, that may rise to 9% – three times the limit set for membership of the European single currency union across the Channel.
Today the British Pound held 3.0% above last week's all-time record low vs. the Euro, but slipped back after an early gain versus the Dollar and Yen.
The Gold Price in Sterling rose to £515 per ounce, more than 5% higher from Wednesday's low at its best level in 7 weeks.
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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