By From Adrian Ash
As Ex-Hedger Barrick Forecasts Higher Prices to Come
THE PRICE OF GOLD in London’s wholesale market reached new 7-week highs for Dollar investors Thursday lunchtime, rising above $1234 an ounce as bond prices slipped and commodities held flat.
Silver prices were little changed around $18.50 an ounce, while Western stock markets cut an earlier 0.5% gain following worse-than-expected US jobless claims data.
“Consolidation above $1190 is bullish [for gold],” says a note from Barclays Capital, quoted by Reuters, “and we continue to expect resistance at $1242 eventually to give way and gold to test $1350 later in the year.”
“The technical picture for gold is looking quite strong at the moment,” agrees a London dealer. “There is little major resistance from here to the record highs of June.”
Even at current levels, “We don’t expect scrap selling to become a dominant force soon,” says Standard Bank, but “with the gold price around $1230, gold physical demand continues to slow, and we expect this to remain the case.”
Gold Trading in India, the world’s No.1 consumer market remains typically quiet, says the Economic Times today, ahead of the autumn festival season starting later this month.
“These price levels are dissuading buyers,” the paper quotes one Mumbai bank dealer.
Local bullion prices today rose to the equivalent of US$1265 an ounce, says the Times of India – a 7-week high more than 3% above this morning’s spot gold prices in London, heart of the world’s wholesale bullion market.
Local gold prices are also rising sharply across the border in Nepal, the Himalayan Times reports, with the central bank’s cap on physical imports and bank sales pushing gold above the equivalent of US$1300 per ounce.
“Economic conditions [globally] are more likely to increase gold prices than the other way around,” said Peter Munk, chairman of the world’s largest gold miner, Barrick Mining, in a Bloomberg interview today.
Defending Barrick’s much-criticized hedge book of forward sales – and saying he sees no need to hedge again any time soon – “Conditions were so dramatically different a decade ago, two decades ago,” Munk went on.
Barrick’s forward sales, built up during the bear market of the 1990s, peaked at an outstanding position of 750 tonnes in 2001 according to VM Group data. It was closed in late 2009, with gold some 265% more expensive to buy.
“We hedged [future production] for 10 years and it paid off,” says Munk.
Since Barrick’s hedge book was closed last October, its stock has gained 22%, very nearly matching the rise in spot gold on the wholesale, professional market. Over the previous eight years, Barrick shares rose by 120%, underperforming gold by more than one-half.
Over on the currency markets meantime on Thursday, the Euro rallied from near 4-week lows vs. the Dollar beneath $1.28.
Eurozone investors wanting to buy gold saw the price slip from a fresh 5-week high above €30,960 per kilo.
The gold price in Sterling also fell from its strongest level since 15 July – dropping 1.1% from £793 an ounce – as British Pound shot higher on stronger-than-expected UK retail sales and money-supply growth, plus below-forecast government borrowing for July.
Once again reversing the previous day’s losses, however, Sterling then failed to hold above $1.5650 however for the fourth session running.
Government bonds also edged back as equities rose, slipping from Wednesday’s record levels and nudging up Japanese yields from 7-year lows.
US yields bounced from their lowest level since the stock-market hit a 12-year low in March 2009.
Ten-year German Bund yields ticked higher from yesterday’s new record low of 2.30%.
“I am going to sell bonds short,” said best-selling investment author and hedge-fund legend Jim Rogers to the Financial Times last week – “but I’m not going to short them now because the central banks have more money than I do.
“If the economy gets worse, then they are going to print money, which is good for silver and gold. If the economy gets better, more commodities will be bought.”
Adrian Ash
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Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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Retail Sales during first week of May were higher by 2.1% compared to April reading. Professional Technical