Gold Whips Near Euro-High as Germany Denies Portuguese Bail-Out, Hong Kong Premium Rises Again
Commodities / Gold and Silver 2011 Jan 10, 2011 - 08:22 AM GMTBy: Adrian_Ash
GOLD PRICED IN EUROS whipped within 1.5% of last month's all-time record highs in London dealing on Monday, as weaker-economy Eurozone bonds fell sharply on a raft of bail-out rumors.
Both silver and gold prices meantime reversed an earlier rally against the Dollar, while stock markets fell together with broad commodity prices.
Over in Asia, Tokyo was closed for a national holiday, but what one dealer called "strong interest" in physical gold bullion drove premiums per ounce above London prices to $3.50 in Hong Kong.
With the Chinese New Year starting in three weeks' time, "Shipments are heading to Asia, as there's good demand here," said another.
"Supply is a little tight on the physical market," a third Hong Kong dealer is quoted by Reuters.
In Mumbai, India, "The good response [to falling gold prices] has been continuing from last week," says a state-run bank's bullion dealer to the newswire.
"I am expecting good sales to continue today," says another, with Feb. bringing the post-harvest wedding season to the world's No.1 gold consumer market.
China today reported a fresh monthly record for national exports in Dec., while the Communist government of Laos announced the launch of a public stock exchange – with foreign investment limitd to 3% – starting on Tuesday.
In the US gold futures and options market, meantime, new data released by the Commodity Futures Trading Commission after Friday's close, showed the "net long" position held by speculative, non-industry players fell last week to its lowest level since August, down 1.5% to the equivalent of 699 tonnes of gold bullion.
Within that number, institutional traders (aka "Large Speculators") slashed the gap between their bullish and bearish bets by more than 5%. Private individuals, in contrast, raised their net long position in Comex gold futures and options by over 3.5%.
Back in Europe on Monday, German chancellor Angela Merkel's office was forced to deny claims in Der Spiegel that she is pressing Portugal to join Greece and Ireland in accepting a joint IMF-EU rescue.
Already holding an entire year of Portugal's debt issuance, bond-buying by the European Central Bank meantime nudged Lisbon's debt prices higher, easing yields back down towards the 7% level which – Gary Jenkins at Evolution Securities notes – triggered last May and Dec.'s bail-outs.
"It seems reasonable to suppose that events will move rapidly this week as the authorities work to put together a credible support mechanism," reckons Simon Derrick at Bank of New York Mellon.
Following last week's launch of joint "stabilization mechanism" bonds by the European Council, "I don't believe Europe is ready for [joint Eurozone bonds]. It's not the solution for the weaker countries," says Andrus Ansip, prime minister of new Euro-currency member Estonia in an interview.
"This idea is advancing," counters Italian finance minister Giulio Tremonti, quoted by French business paper Les Echos.
Between them, Eurozone states are set to ask the bond market for a total of €24 billion this week.
Belgian bonds fell hard Monday morning, after Belgium's King Albert II asked the caretaker government to propose a 2011 budget.
Spanish debt also fell, driving the yield offered by 10-year debt to 5.56%.
"The inability [of the Dollar gold price] to revisit the last major high at $1430 is a concern," says the latest technical analysis from bullion bank Scotia Mocatta. But "it is interesting to note that gold has experienced a similar cycle high at the start of each of the past two months."
Nov. and Dec. then saw the gold price rebound from 7% and 5% falls respectively to rise above $1420 per ounce again.
Friday's low of $1355.50 per ounce in the physical spot gold market was 4.7% below last Monday's high.
By Adrian Ash
BullionVault.com
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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 2011
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