Gold "Lackluster" in "Calm Before Storm"

By: Adrian_Ash

THE PRICE OF GOLD in wholesale trading slipped to a new 1-week low at $1640 per ounce in London on Thursdayb as the US Dollar rose and crude oil slipped again.

Ahead of Friday's much-anticipated US Non-Farm Payrolls report for April, weekly data showed a fall in the number of jobless benefit claimants.

Spain meantime sold €1.6 billion of new 3- and 5-year government debt, paying 1.4 percentage points more in interest than at the last time of asking.

A sale of €5 billion in new government debt in France, where current president Sarkozy looked set to lose this weekend's election to Socialist candidate Hollande, meantime drew a greater excess of investor demand than at the last sale in April, with interest rates falling slightly on 9- and 10-year debt.

The Euro held at $1.3130 – right in the middle of the last month's tight 2.5¢ range.

With trading volume now lower for longer than any time since late 2007, US stock market futures pointed 0.2% higher after the Dow Jones Industrial Average yesterday slipped back from 4-year highs.

Slipping in line with the gold price, silver fell back to $30.40 per ounce.

"In this lackluster environment, it seems like the gold bullion market is in need of more than just resilience," says a note from Swiss refining and finance group MKS.

"[The gold price] has FLAT LINED on a closing basis," says the latest technical analysis from Russell Browne at Scotia Mocatta in New York, "staying glued between 1635 and 1670 over the past month.

"This sideways consolidation is the calm prior to the next storm...The long-term bullish trend line comes in near 1630 on daily chart."

Over in India in contrast – the world's #1 gold consuming nation – "Gold traders have extended their positions in futures market as prices of the precious metal in spot market touched an all-time high," reports the Economic Times.

Touching INR 29,690 per 10 grams today, the gold price for Indian wholesalers has now recovered 2012's early 10% fall to reach a series of fresh all-time highs this week.

Amid a wave of strikes and protests by Indian jewellers against this year's duty and tax rises, last month's Akshaya Tritiya festival failed to stoke consumer demand, says the Bombay Bullion Association, with gold bullion imports falling to just 30 tonnes from April 2011's level of 90 tonnes.

Helping gold rise, the Rupee fell further again on the FX market Thursday, extending this week's drop vs. the US Dollar to more than 1% and erasing the last of 2012's rally so far.

"The financing of the current account deficit will continue to pose a major challenge," the Reserve Bank of India recently noted in a policy statement.

"Lot of new positions has been created in [Indian gold ftures ] after traders noticed sharp rise," Money Life quotes Badruddin Khan, researcher at Angel Broking & Commodities.

"The momentum is likely to be continued with a back-up of Dollar appreciation."

Back in Europe, where the European Central Bank today left its key interest rate unchanged at 1.0% for the sixth month running, factory-gate inflation in the 17-nation Eurozone slipped to 3.3% per year in April, new data showed.

Here in the UK, where the ruling coalition's Conservative and Liberal Democrat parties were both expecting "dismal" results in local council elections on Thursday, house prices showed a near 1% annual slip on the Nationwide index.

In London, precious metals consultancy GFMS – now part of the Thomson Reuters news group – said the surplus of available metal over demand rose sharply in both platinum and palladium in 2011, thanks to stockpile sales and weak auto demand, especially in Europe.

Silver bullion stockpiles yesterday retreated further on Wednesday from this week's 25-year record highs, with the withdrawal of half-a-million ounces of "eligible" metal – which qualifies for settlement in Comex futures, but isn't made available by the owner – taken out of approved depository storage.

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 2012

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