Gold Slips vs. Rising Dollar as Stocks Markets Fall
Commodities / Gold and Silver 2011 Feb 10, 2011 - 08:23 AM GMTBy: Adrian_Ash
THE DOLLAR price of gold slipped to two-day lows on Thursday morning as the US currency rose and world stock markets fell hard.
Hong Kong's Hang Seng index lost 2% and London's FTSE100 dropping 0.9% by lunchtime.
Silver prices shed 2.5% from Wednesday's early high.
"London entered [Thursday's trade] a seller of precious metals," says one wholesale trader, "taking silver down through $30 per ounce."
"Risk appetite appears to waning [but gold investment] demand...is not forthcoming," says Standard Bank.
Indian stock markets have lost more than $20 million per minute so far in 2011, the Economic Times reports, with billionaire Anil Ambani blaming "vicious and illegal" rumors – spread by "unscrupulous corporate rivals" – for the 19% drop in Reliance Infrastructure Ltd which took his personal loss on Wednesday to $2.6 billion.
"Physical [gold] demand, especially in Asia, remains on the sidelines," says Standard Bank.
"Perhaps the lack of interest in China, after the return from [Lunar New Year] holidays, is also contributing to investor unease."
Measured in the Euro, however, physical gold investment prices today recovered half of yesterday's near-1% drop, as the single currency fell hard on the forex market.
Portugal's government debt extended Wednesday's drop – pushing interest-costs to new record highs, and forcing the European Central Bank to intervene with fresh bond purchases – while un-named sources apparently confirmed that German "inflation hawk" Axel Weber doesn't want to succeed French policy-maker Jean-Claude Trichet as president of the European Central Bank in Oct.
Sterling buyers meantime saw the gold price hold flat after the Bank of England kept its key lending rate at a record low 0.5% for the 23rd month in succession – the longest run of "no change" since the Great Depression's policy rate of 2% was maintained from 1932 to 1951.
"We need to make [spending] cuts," said UK government minister Andrew Stunnell to the BBC this morning, because "we're borrowing £400 million a day."
Brent crude oil meantime whipped around $100 per barrel, copper slipped back from new record highs, and wheat futures dropped 1% from Wednesday's two-year highs after Chinese premier Wen Jiabao vowed to spend $2 billion boosting grain production and fighting the winter drought in China – now the world's No.1 producer and consumer of the crop.
"China will probably start to buy gold in the near future, but they won't report it for two or three years," said economist David Hale to the Mining Indaba conference in Cape Town today.
Already the world's No.2 gold consumer market, strong purchases by the People's Bank "would be a huge development for the gold market," says Hale, especially if Beijing heeds those advisors recommending 10,000-tonne reserves – greater even than the United States' official stockpile.
"The odds very much favour China making, over five years, very large gold purchases, and this in turn makes me bullish on the gold price."
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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