by Adrian Ash
Thurs 24 Mar., 09:45 EST
Gold & Silver Hit New Records, But ETF Buying “Absent” as Eurozone Debt Crisis Hits Lisbon
THE PRICE OF GOLD hit the second new all-time high in succession at Thursday morning’s London Gold Fix, set at $1441.25 per ounce as the Dollar held flat on the forex market and US crude oil prices rose.
New York’s stock markets opened the day 0.5% higher. Silver bullion jumped to fresh 31-year highs above $37.85 per ounce.
Trading on Egypt’s re-launched stock exchange was meantime halted today for the second day running after another sharp drop at the opening bell.
Between 15 and 25 people were reported killed in Syria, where the ruling dynasty’s security forces fired on protesters in Deraa on Wednesday.
Forces loyal to Colonel Gaddafi continued to attack rebel-held towns in Libya, despite the fifth night of joint-United Nation airstrikes against him.
“[Gold ETF] investors have been noticeable by their absence, which suggests there has been some rotation out of gold,” says the latest Metal Matters from bullion bank Scotia Mocatta.
Combined holdings across the trust-fund Gold ETFs which Scotia tracks have shrunk by 5% since peaking at 2,130 tonnes in late Dec. In the giant SPDR Gold Trust, this week has seen holdings shrink by 1% to 1214 tonnes.
“What we may have seen is a period where profit-taking has outpaced new buying,” says the bank’s latest analysis. “Silver prices [in contrast] are exceptionally strong, so strong that we feel there must be some aggressive short covering as well as fresh buying.”
Looking at the relevant strength of the two precious metals, the ratio of gold to silver prices “is now convincingly through the 1998 weekly low” notes the London dealing team at Japanese conglomerate Mitsui.
“Technically there is plenty of room for the ratio to continue lower” they reckon, as silver prices rise faster than gold and cut the ratio to barely 38 times at Thursday morning’s London fixes.
That’s down from a recent peak near 85 immediately after the 2008 collapse of Lehman Bros.
Over on the currency markets Thursday mornning, the Euro rallied back to unchanged after Belgium’s prime minister said the European Union was “obviously ready to step in and help” if asked by Portugal – now trying to form a new government following the rejection of premier Socrates austerity budget.
That capped the gold price in Euros below €32,750 per kilo, some 1.8% higher for the week so far.
Ten-year Portuguese bond yields rose Thursday towards new post-Euro highs of 7.7%. Bail-out aid from the Euro Stability Fund being finalized today in Brussels would likely cost 6.0%. Greece last week renegotiated its bail-out costs down to 5.0% per year.
RBS analysts reckon a Portugal rescue is now “pretty inevitable” and will require €80 billion in funds. Two un-named EU sources quoted by Bloomberg put the figure at €70bn ($99bn).
“There’s more confidence around Spain,” says analyst Silvia Verde at brokers Inverseguros in Madrid, speaking after the Moody’s rating agency today downgraded 30 smaller Spanish banks once again on bad debt concerns.
“The market mood is better than it was a few months ago.”
European stock markets on average rose sharply on Thursday, while German and UK government bonds held flat and Brent crude ticked down through $115 per barrel.
The gold price in Sterling extended Wednesday’s gains, trading above £890 per ounce for the first time since New Year.
“High and sustained oil prices are negative for base metals prices but supportive of gold,” says the latest Precious Metals Monthly produced by London’s VM Group consultancy for ABN Amro.
Warning that “there is little correlation to draw upon to offer an accurate estimate by how much [precious or base] metals could move per $1/barrel increase in oil,” VM’s analysts says “the key difference between the run in the oil price now compared to past price spikes is that the global economy is presently fragile, having emerged from the worst recession since the 1930s.”
Speaking about US monetary policy on Wednesday, “We have done our job [and] are certainly at risk of doing too much now,” said Dallas Federal Reserve Bank president Richard Fisher.
“The word we gave was that the [quantitative easing] program would end in June… There is abundant liquidity in the machine we know as the United States…”
Fisher said he can now see “extraordinary speculative activity” in the US economy.
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 World Gold Council market-development and 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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