Gold Choppy as Investors Review the Obama Bounce
Commodities / Gold & Silver Nov 05, 2008 - 07:30 AM GMTBy: Adrian_Ash
THE PRICE OF GOLD slipped back from an overnight high of $769 per ounce in London on Wednesday, while European stock markets reversed one-third of Tuesday's "Obama Bounce" after the president-elect's US landslide was confirmed.
The UK's FTSE100 index lost 1.3% on new data showing the manufacturing sector suffering its worst contraction since 1980.
In Paris the Cac40 dropped more than 2% after the EuroStat data agency said Eurozone retail sales fell 1.8% month-on-month in Sept.
Wall Street futures also pointed lower – and Treasury bonds fell, driving long-term interest rates higher – after the ADP report of private-sector payrolls fell 157,000 for Oct. (analysts forecast 90,000 losses) and the Mortgage Bankers Association said new US home-loan applications fell last week by one-fifth.
The AM Gold Fix here in London was set at $753.25 per ounce – its best level since Thursday against the Dollar and also a five-session high vs. the Euro and Sterling.
"Choppy price action appears to be of a consolidating nature," says the latest market note from Scotia Mocatta, the market-making dealer here in London's professional Gold Bullion market.
"We believe the downside risk in gold remains intact while we hold below $777. A move above this level bodes well for a stabilization in the recent weak move off 930."
Today in Tokyo, Japanese Gold Futures for delivery in 12 months' time closed 3.2% higher as the Nikkei stock index regained another 400 points of last month's 2,700-point loss.
Crude oil held above $68 per barrel, while base metal prices rose sharply from their 55% losses since July.
Both the Japanese Yen and US Dollar today slipped back towards Tuesday's one-week lows vs. the Euro, despite analysts forecasting a 0.5% rate-cut from the European Central Bank tomorrow.
The British Pound also rallied despite widening expectations of 0.75% or even 1.00% cut to UK rates from the Bank of England.
More than twice its level when UK interest rates were last that low at 3.5%, the Gold Price in Sterling today held above £475 an ounce.
For European investors wanting to Buy Gold today, the price rose near a one-week high of €590.
"Physical demand is very strong [while] the cost of production worldwide is rising," said Peter Hambro, chairman of the eponymous mining group, to Bloomberg by phone this morning.
The second-largest Gold Miner now working in Russia, Peter Hambro plc today reported 32% growth in third-quarter output, but said it will delay moving from the junior AIM market to a full listing on the London Stock Exchange due to "extraordinary conditions" in world money markets.
Even though, near-term, Hambro believes there will be "little downward pressure on Gold Prices ...we have to conserve resources in a period of great financial uncertainty," he went on.
"Things that will not produce immediate revenue will get put on the back burner."
Global Gold Mining production peaked in 2003 when Dollar prices were less than half current levels.
Total mining costs have more than doubled since then on average, with the shutdown in new finance sparked by the credit crunch leading Mark Citafuni – head of AngloGold Ashanti, the world's No.3 Gold Miner Stock – to warn last week of a "crisis" in global production.
By Adrian Ash
BullionVault.com
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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 2008
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