From Adrian Ash
From Private Investors Even as Fund Managers Sell, Technical Analysts Target “Much Lower” Drop
THE PRICE OF GOLD and silver bullion prices rose together with all major currencies on Tuesday morning vs. the Dollar, erasing last week’s losses for US investors as European stock markets gained more than 1%.
Asian bullion dealers reported “continued physical demand” in both gold and platinum.
The Euro briefly rose through $1.34 for the sixth time in as many weeks, while the British Pound jumped to two-month highs over $1.60 on news of the sharpest month-on-month rise in UK Consumer Prices since Aug. 1990.
“Gold bullion’s recent losses look set to worsen, with a technical target suggesting a fall to as low as $1230 per ounce,” says Reuters North Asia editor Phil Smith in a technical analysis.
Spying a “possible [head and shoulders] topping pattern…we are now sitting on the neckline,” says Smith. “Watch for a break below this line” near $1350.
“Should we break $1350, we could go much lower,” agrees chart analysis from Swiss refiner MKS’s finance division.
But “We will see quite a bit of bargain hunting if price dips below $1360,” reckons Shanghai CIFCO Futures’ analyst Li Ning Prices, “because physical demand ahead of [Feb.3rd’s] Lunar New Year will help support.”
Eurozone and UK government bond prices meantime slipped on Tuesday morning – nudging open-market interest rates above 7% on Portuguese debt – even as US Treasuries ticked higher.
The fact that “Inflationary pressure is increasing in the Eurozone and UK is not only ironic,” notes Steve Barrow at Standard Bank, because “Japan and the US want higher inflation, but it presents particular problems to the ECB and BoE as they are the ones that attempt to meet [formal] inflation targets, while the Fed and BoJ do not.”
UK consumer prices rose 3.7% last month from Dec. 2009, need data showed today.
The Bank of England’s mandated target sets an upper limit of 3.0%, which was breached throughout 2010.
In contrast with this month’s heavy selling of gold ETF trust-fund positions by institutional investors, private investors “have so far not been influenced by the doubts creeping in at their professional fund-managers,” says German refinery group Heraeus’ head of sales Wolfgang Wrzesniok-Rossbach in his first Precious Metals Weekly of the New Year.
Indeed, “in the last two weeks [retail investors] have bought large quantities of gold bars and coins; so much so that despite higher production, some denominations again already have delivery-time delays.”
Similarly in silver bullion products, Heraeus reports “massive demand for bars and coins”, even as ETF trust funds and Comex futures contracts “saw considerable profit-taking driven liquidations” by institutional traders.
“The decline [in global silver investment positions] was mainly due to the US iShares product,” says London’s VM Group in its latest analysis for ABN Amro, noting the “largest fall since mid-April 2010” in the world’s largest silver ETF.
Gold bullion and derivatives also suffered “a sharp fall in global investment,” the consultancy notes.
Over in the commodity markets on Tuesday, Europe’s Brent crude-oil benchmark slipped further from Friday’s 25-month high of $99 per barrel.
Contrary to last month’s “no change” agreement, several members of the Opec oil cartel are actually raising output, says the International Energy Agency, following “tacit recognition by some producers of a need to adjust actual production levels to try to take some of the steam out of the market.”
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 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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