Gold & Silver Slide Together with Dollar

From Adrian Ash

BullionVault

As Stocks Fall on Weak US Inflation & Investment-Flow Data

THE PRICE OF GOLD fell hard at the start of New York trading on Friday, dropping back to this week’s early lows for Dollar buyers – and hitting the lowest price since early May for Euro, Sterling and Aussie buyers – while stock markets sank on weak US data.

• Commodity prices slipped, with silver also falling toward Tuesday’s low of $17.80 an ounce.

• The Dow Jones index dropped 1.0% at the opening.

• “With [Thurs] afternoon’s US Dollar weakness,” say bullion bank Scotia Mocatta’s analysts in a note, “gold bulls would have expected a decent move up to the $1225 technical pivot.

• “On the bright side for gold, this [was] the third consecutive close above $1200.”

• Gold prices today slid to $1190 an ounce, while the US Dollar rallied against the British Pound but slipped to a near 10-week low vs. the Euro and sank to fresh 2010 lows vs. the Japanese Yen at ¥86.50.

• Japanese stocks earlier closed the day sharply lower as the Yen rose, heading into the long Sea Day weekend some 2.9% down.

• Tokyo gold futures also fell, slipping 0.5% to ¥3,397 per gram.

• Physical Gold Trading in Asia was “very quiet” today according to one Hong Kong dealer, but “Investors don’t know what to do after selling gold,” says Ronald Leung, head of Lee Cheong Gold Dealers, speaking to Reuters.

• “They can’t really put the money into other markets. So they are still holding certain amounts of gold in their portfolios.”

• Noting the sharp drop in Euro gold prices that actually began on July 1st, “Investors’ trust in the Euro currency is back,” reckons Bayram Dincer, analyst at the Liechtenstein royal family’s LGT Capital Management.

• “Previous gold safe-haven buyers, mostly Europeans due to Euro fears, are reconsidering their gold investment as prices in Euro terms are declining.”

• The gold price in Euros has declined in every summer since the single currency was launched a decade ago, BullionVault analysis shows, rising to hit new highs for the year between Oct. and Dec. in 2001, 2005, 2007, 2008 and 2009.

• “The unwinding of the Euro gold trade” – a position adopted by an increasing number of non-EU institutions and funds as the price gained 22% in the first half of 2010 – “effectively means buying-Euro and selling-gold,” says Leon Westgate for Standard Bank today.

• “The weakness [is] spilling over into the rest of the precious metals complex and explains why a weaker Dollar has had not impact on prices.”

• Following Wednesday’s “hardly dazzling” auction of Greek government debt, as The Economist puts it, Chinese premier Wen Jiabao said Friday that Beijing will continue to buy Eurozone financial assets, a promise described as “an important signal” by his guest, German chancellor Angela Merkel.

• Returning this week to the bond market for the first time since the EU and International Monetary Fund agreed a €110bn rescue facility, Athens raised €1.6bn in six-month bills, paying a yield of 4.65%.

• That compares with 6-month German Bund yields of 0.47%.

• Portugal yesterday raised €1.7bn in a mix of 2- and 9-year debt, paying more than 2.4 and 2.7 percentage points respectively above comparable German debt.

• Spain meantime sold €3bn in 15-year bonds, paying a yield of 5.12%. Comparable Bunds pay 2.93%. Spain’s previous 15-year auction in late April required a yield of just 4.43%.

• “Appetite for Spanish paper is alive,” says one fixed-income strategist, quoted by Bloomberg.

• Ahead of next Friday’s “stress test” results for 91 European banks, meantime “I get the feeling that what will come out will be rather reassuring,” said IMF chief Dominique Strauss-Kahn on French TV earlier.

Adrian Ash

BullionVault

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Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2010

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