Gold Outshines Dollar & Euro

London Gold Market Report
Thu, Dec 10 2009, 14:21 GMT
by Adrian Ash

BullionVault.com



Gold Seen "Tracking the Dollar" as "Ticking Timebombs" Threaten Euro Currency

THE PRICE OF GOLD was little changed Thursday morning in London, recording its lowest AM Fix since Nov. 13th at $1125 per ounce as the US Dollar held onto this week's rally on the currency market.

Both the Swiss and UK central banks kept their key interest rates at historic lows of 0.25% and 0.50% respectively.

Gold priced in Euros and Sterling hit new 3-week lows below €762 and £690 an ounce.

The Paris stock-market fell hard on news the French government is following London with a one-off 50% levy on banking bonuses.

"While gold holds below former support at $1138, the risk remains for a deeper correction to channel support at $1086," says the latest analysis from Scotia Mocatta, noting the uptrend in gold starting Sept. 1st.

"Major support in gold is seen at $1019 which is the 38.2% Fibonacci correction of the $683 to $1226 one-year up move," it adds.

Crude oil contracts meantime struggled to recover above $71 per barrel after Wednesday's surprise build in US petroleum-product stockpile inventories.

Copper prices fell for the sixth session running in London, extending their longest drop in 12 months.

"Gold and silver basically were tracking the Euro today," reports a Hong Kong dealer in a note.

"The correlation between the Dollar and gold is very strong and that is prima facie reason why gold is holding above $1120," agrees Pradeep Unni in Dubai for Richcomm Global Services, noting the flat action in currencies but adding that the metal remains "vulnerable to profit-taking."

New York's SPDR Gold Trust, which allows investors to "track" the gold price through shares in its trust-fund, has cut its bullion holdings by 1.4% in the last week – "testament to shifting market sentiment" according to one analyst.

"The chance of gold bottoming near $1100 is increasing," says another.

On the forex market today, "We don't see much attraction in major currencies," writes Standard Bank strategist Steven Barrow.

"The Dollar still looks poor, Sterling is being beaten up by the policymakers, and even the previously strong Euro has had the rug pulled out from beneath it by downgrades from within the periphery Eurozone countries.

"The Swiss Franc could rise – if the SNB would only let it – while a return to quantitative easing in Japan is hardly what the doctor ordered for future Yen strength."

London's Bank of England today confirmed it will continue a £200 billion ($325bn) program of quantitative easing, creating new money to buy mostly government debt as the UK's fiscal deficit hits a peace-time record equal to 14% of GDP.

Switzerland's central bank meantime halted its 9-month program of buying corporate bonds with newly created money. But in his last policy speech as SNB chairman before handing over to former hedge-fund manager Philipp Hildebrand in 2010, Jean-Pierre Roth noted that the Swiss Franc's recent stability vs. the Euro "shows that the monetary policy followed since March has been effective."

The SNB has been selling Francs in the currency market to "decisively prevent any excessive appreciation."

Gold priced in Francs has risen 29% so far in 2009.

"The ball lies in Greece's court," said European Central Bank policy-maker Axel Weber today, urging Athens to address its 13% fiscal deficit after Greek bonds were downgraded by the Fitch rating agency on Tuesday.

Spain was placed on "negative watch" by S&P analysts on Wednesday.

"Within the [Eurozone] stability and growth pact, there is no role for the IMF – rightly," Weber added.

Germany's Der Spiegel quotes Josef Ackermann, head of Deutsche Bank, saying that "a few time bombs" are ticking in the European single currency project, launched 10 years ago and now encompassing 350 million people across 17 member states.

Reuters says the danger is that a sovereign debt default "could destroy the common European currency."

UK gilts on Thursday led a worldwide fall in government bonds, with the yield offered by 10-year gilts rising to a four-week high of 3.82%.

Ten-year German Bunds offered 3.17%. Mid-dated US Treasury yields rose to 3.24%.

"One of the fundamental lessons of the [financial] crisis is that when we underestimate financial risks and focus only on the short term, we set the stage for a future catastrophe," says ECB president Jean-Claude Trichet in an interview with the Belgian press published today.

"I will not make any specific comments regarding gold," Trichet added when asked about "a return to risk-taking on the part of investors."

Eurozone central banks have sold little more than one tonne of bullion between them since the end of September, when the new Central Bank Gold Agreement – limiting aggregate sales of 400 tonnes per year until 2014 – came into effect.

Comments

  1. tell me that the Soros plea and all the short positions that his Bullion Bank buddies have for IMF gold Sale to fund Climate Change is nothing but a plea for the Shorts to cover their contracts ??????


    http://goldnews.bullionvault.com/gold_caution_120220093

    http://goldnews.bullionvault.com/files/slv_etf_2.png


    For some perspective in the Gold Futures market, meanwhile, Comex commercial traders are now net short contracts representing 30.6 million ounces of gold metal – about 952 tonnes of paper gold bets that would improve if gold falls in price.

    That gives new meaning to the phrase "motivated seller" doesn't it?

    The chart above looks at just the nominal amount of commercial net short positioning. The chart below compares the Comex commercial net short position for gold with the total open interest (LCNS:TO). That gives us a better idea of how the largest hedgers and short sellers are positioned relative to the rest of the Comex traders.

    As measured against all Comex open contracts, the relative commercial net short position snapped back up from 52.8% to 58.7% of all contracts open on the COMEX, division of NYMEX in New York. That's a large enough jump to be considered a warning-shot and we are back to an extremely high level, suggesting that commercial traders are once again confident or "determined" that gold will move lower near term.

    We hasten to add, however, that the commercial "industry insiders" are not always right. The most recent example came on September 22 (a little over a month ago) as the LCNS:TO reached an all time record 61.8% of all the contracts open on the Comex. That was with gold at $1,014.96.

    Gold has since broken above $1200 the ounce.


    Why George Soros is after IMF gold

    http://www.commodityonline.com/news/Why-George-Soros-is-after-IMF-gold-23792-3-1.html

    Copenhagen climate summit: George Soros urges use of IMF gold for green loans


    http://www.telegraph.co.uk/earth/copenhagen-climate-change-confe/6778960/Copenhagen-climate-summit-George-Soros-urges-use-of-IMF-gold-for-green-loans.html

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  2. Federal Reserve manipulating gold prices: Ron Paul ; he said that the FED and Executive Branch of the Obama Administration as has previous administrations are suppressing the inflation data by manipulating gold .

    http://www.commodityonline.com/news/Federal-Reserve-manipulating-gold-prices-Ron-Paul-23803-3-1.html

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  3. Subject: Soros needs the IMF sale for a different reason .......


    Soros needs the Gold Sale at the IMF to cause the price swing to cover his and bullion banks short positions that then can redirect capital flows in directions they will already have setup , that would have went towards safe haven investments once the pound caves in , and investors flee out of pound related stocks .

    Then if they can get control of the feeder capital flows they can redirect it to their holdings in Pound related positions into dollar positions once the Pound gets down graded and investors flee Pound trades for dollar trades and salvage their pound positions in unions but it will take the IMF sale of their Gold to fund Climate change projects as a cover , for this trigger to enact the run out of gold and into dollar trades and create the vacuumed Soros and Bank holding companies need to redirect their positions in gold shorts and currency trades ..... this link shows the hemorrhaging at play in pound currency denominations and whats at play for Soros and the gang to try for a redirect out of Gold related investments and into their feeder funds to fill this vacuum on pound devaluations coming ;

    Pound’s Demise Will not be Hard to Time , as investors flee to dollars the hyper bubble on the dollar will cause massive problems for the dollar indexes....

    http://www.forexblog.org/2009/12/pounds-demise-will-not-be-hard-to-time.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+forexblog%2FEOmh+(Forex+Blog

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  4. take a look at this and tell me we are not seeing this playing out to a absolute parallel ????
    you can always link a time in history when gold and Commodities were on the rally , and some where in the world there were grave consequences going on with populations and their demise in one fashion or another .... you have to wonder if today's Government reactions and Policies trying to evolve are not struggling with this behind the closed doors in Washington DC after all , its 35 years later since this study was done and we are 3 billion more and growing by 100 million a year .
    http://www.population-security.org/11-CH3.html#1
    I pulled these examples from the population security study link here and focused on what was said here ....

    MINERALS AND FUEL - Index
    8. Rapid population growth is not in itself a major factor in pressure on depletable resources (fossil fuels and other minerals), since demand for them depends more on levels of industrial output than on numbers of people. On the other hand, the world is increasingly dependent on mineral supplies from developing countries, and if rapid population frustrates their prospects for economic development and social progress, the resulting instability may undermine the conditions for expanded output and sustained flows of such resources.

    9. There will be serious problems for some of the poorest LDCs with rapid population growth. They will increasingly find it difficult to pay for needed raw materials and energy. Fertilizer, vital for their own agricultural production, will be difficult to obtain for the next few years. Imports for fuel and other materials will cause grave problems which could impinge on the U.S., both through the need to supply greater financial support and in LDC efforts to obtain better terms of trade through higher prices for exports.
    ECONOMIC DEVELOPMENT AND POPULATION GROWTH - Index
    10. Rapid population growth creates a severe drag on rates of economic development otherwise attainable, sometimes to the point of preventing any increase in per capita incomes. In addition to the overall impact on per capita incomes, rapid population growth seriously affects a vast range of other aspects of the quality of life important to social and economic progress in the LDCs.

    11. Adverse economic factors which generally result from rapid population growth include:

    * reduced family savings and domestic investment;
    * increased need for large amounts of foreign exchange for food imports;
    * intensification of severe unemployment and underemployment;
    * the need for large expenditures for services such as dependency support, education, and health which would be used for more productive investment;
    * the concentration of developmental resources on increasing food production to ensure survival for a larger population, rather than on improving living conditions for smaller total numbers.

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  5. I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

    Lucy

    http://forextradin-g.net

    ReplyDelete

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