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Gold Supported by "Zero-Rate Fed" & Bank of Japan, Hits New Euro Record

Commodities / Gold and Silver 2010 Apr 07, 2010 - 07:50 AM GMT

By: Adrian_Ash

Commodities

THE PRICE OF GOLD in Dollars held just south of late Tuesday's 4-week high in London today, trading above $1135 an ounce as strong gains on Asian stock markets failed to carry over into Europe


Gold prices in Shanghai rose for the third day running, but local dealers called the market "stagnant" compared to platinum and palladium – primarily used in catalysts by the auto-industry – which both rose sharply.

Silver whipped around $18.00 an ounce, little changed from the start of the week.

Crude oil slipped back to $85 per barrel.

"Gold bullion [is] supported by speculation that the Fed will keep rates near zero for the time being, and higher oil prices," said one Tokyo research analyst to Bloomberg earlier.

"There was very little gold selling in the physical market yesterday afternoon," notes Walter de Wet at Standard Bank in London. "However, buying conviction remains lacking above $1130."

"From here gold will look to take out the March high of $1145," reckons another London analyst, "while silver, platinum and palladium each look to have room to run up."

The gold price in Sterling jumped above £750 an ounce Wednesday morning – just £10 shy of the record highs hit this time last month – as the Pound fell on news of weaker-than-expected High Street pricing.

The Euro sank through $1.3350 to the Dollar after new data said factory prices rose by just 0.1% in Feb. across the 16-nation currency zone.

Gold prices for Euro investors pushed up to a new record high above €27,392 per kilo.

Hong Kong's stock market added 1.8% for the day. US stock futures fell as Treasury bonds rose, pushing 10-year yields further below last week's 10-month high of 4.00%.

On the monetary policy front, the Bank of Japan followed yesterday's rate-rise from the Reserve Bank of Australia by sticking with its record-low rate of 0.1% for the 16th month running.

Minutes from the latest Federal Reserve meeting show policy-makers agreed both to keep interest rates at zero, but also to keep "monitoring financial markets and institutions –including asset prices, levels of leverage, and underwriting standards – to help identify significant financial imbalances at an early stage."

US regulators from the Securities & Exchange Commission (SEC) are today expected to present new rules for asset-backed securities, almost three years after Bear Stearns "Enhanced Leverage" mortgage funds collapsed.

New disclosure rules will apparently force the banks that create mortgage-backed bonds to state whether the home-loans gathered together for sale to other investors are "no doc", "low doc", or "self-cert", as well as what type of mortgage – prime or subprime, teaser or fixed – is involved.

Commenting on last week's tie-up with the world's largest bank, meantime, "Gold demand has not only been strong over the last five to 10 years in China but it looks as if it is going to remain strong for a considerable time to come," says World Gold Council managing director of investments, Marcus Grubb, speaking to South Africa's MineWeb.

"It is in that context that we...lend our support to the growth of gold investment demand in the Chinese market," working with China's ICBC, said Grubb.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
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

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


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