From Adrian Ash<\/p>\n
\nBullionVault<\/a><\/p>\n \nBut \u201cNot Long-Term Negative\u201d as Emerging Markets Also Flirt with Sub-Zero Real Rates<\/strong><\/p>\n <\/strong><\/p>\n \nTHE PRICE OF GOLD<\/strong> bar prices moved sideways vs. the Dollar but recovered against a falling Euro in London trade on Thursday morning, doubling a 0.5% rise in Eurozone stock markets.<\/p>\n \n\u201cWe believe a short-term top is now in place off $1430,\u201d says technical analysis from market-maker Scotia Mocatta, pointing to \u201ckey support\u201d at $1353.<\/p>\n \nThe gold price in Sterling<\/a> meantime gained 1.1% from Wednesday’s near two-week low of \uffe1870 \u2013 a new all-time record when first reached this time last month.<\/p>\n \nMajor-economy government bonds rallied from their worst two-day sell-off in more than two years, easing 10-year US, German, Japanese and UK yields back down from six- and 7-month highs.<\/p>\n \nCrude oil bounced above $88.70 per barrel. Copper futures touched new all-time highs in London trade.<\/p>\n \n<\/a><\/p>\n \nSilver bullion<\/a> also rallied, regaining 64 cents of Tuesday and Wednesday’s $2.67 drop \u2013 a near-9% plunge from this week’s fresh three-decade highs above $30 per ounce.<\/p>\n \n\u201cOf increasing significance,\u201d says the latest commodities analysis from French bank (and London bullion dealer) Natixis, \u201cthe sharp rise in [bond] yields to six-month highs does appear to be slowing gold’s recent ascent.\u201d<\/p>\n \nEven so, and because forward prices for future delivery of gold bullion<\/a> must include interest-rate costs, this week’s sharp rise in 10-year US Treasury yields \u201cleav[es] the 10-year forward gold price <\/a>higher by $30 per ounce, despite the fall in spot gold<\/a> prices,\u201d Natixis notes.<\/p>\n \n\u201cA rise in real interest rates [after inflation] is bearish for gold and seems to be capping upside at the moment,\u201d agrees Walter de Wet at Standard Bank.<\/p>\n \n\u201cHowever, despite the latest rise in US real interest rates, the fact that the level of real rates remains low, still makes gold investment<\/a> attractive.<\/p>\n \n\u201cWe believe real interest rates will have to rise much higher before any long-term negative impact will be seen on gold investment<\/a>.\u201d<\/p>\n \nOutside the US and UK \u2013 where today’s \u201cno change\u201d decision from the Bank of England left interest rates near 33-year lows beneath inflation \u2013 emerging economies are also flirting with sub-zero real rates of interest, Japanese investment bank Nomura’s London office notes.<\/p>\n \nCalling it \u201cpostmodern monetary policy\u201d \u2013 aimed at deterring inflows of US and other Western capital suffering sub-zero real rates at home \u2013 \u201cWe see [Emerging Europe and the Middle East] central banks erring on the side of loose policy,\u201d says Nomura, \u201ceven at the expense of higher inflation.\u201d<\/p>\n \nIt notes Turkey’s recent cut to bank lending rates, Israel’s 1% discount on forward rates to the official target, and the South African Reserve Bank \u201cmaintaining an easing bias, despite real rates approaching negative territory.\u201d<\/p>\n \nChina’s central bank \u2013 which earlier this week announced a \u201cshift to prudent monetary policy in 2011\u201d – today tried to reassure stock-market investors that a widely-expected hike in Chinese interest rates would only dent equities for \u201cone or two days’.<\/p>\n \nState Council economist Ba Shusong said Tuesday that Chinese consumer-price inflation is likely to hold between 4-5% next year. Cash-saver deposit rates are currently just 2.25%.<\/p>\n \nGeopolitically, \u201cWith the debt crisis in Europe still in the picture and tensions in the Korean peninsula still brewing, gold couldtry new highs after the recent long liquidation,\u201d says Marwan Shakarchi at MKS Finance in Geneva.<\/p>\n \n\u201c[But] we still expect the market to remain in choppy conditionswhile lacking major drivers.\u201d<\/p>\n \nIreland’s government debt was today downgraded again by the Fitch credit ratings agency. UK finance minister George Osborne, seeking parliamentary approval of a \u20ac3.9 billion loan to Dublin, said the aid will be reviewed every 6 months.<\/p>\n \n\u201cAnecdotal evidence and various news reports suggests that the buying last week was concentrated on Portuguese government bonds,\u201d says data provider Markit, commenting on the European Central Bank’s ongoing bond-buying support program.<\/p>\n \n\u201cThis isn\u2019t surprising given that Portugal is widely perceived as the most vulnerable to further contagion,\u201d it concludes, but also means that \u201cthe ECB has either abandoned Ireland at this point, or if it hasn\u2019t, its efforts are having increasingly little effect,” says the FT<\/em>‘s Alpha blog. \nBullionVault<\/a><\/p>\n \nGold price chart, no delay<\/a> |\u00a0\u00a0 Buy gold online at live prices<\/a><\/p>\n \nFormerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash<\/strong> is the editor of Gold News<\/a> and head of research at BullionVault<\/a> \u2013 winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council<\/a> research body \u2013 where you can buy gold today<\/a> vaulted in Zurich on $3 spreads and 0.8% dealing fees.<\/p>\n
\nAdrian Ash<\/p>\n