By by Adrian Ash
Mon 11 Apr., 08:50 EST
Silver Investors “Still Not Stretched” as Gold’s Fresh Dollar Record Leaves Euro-Price Unchanged for 3rd Month Running
WHOLESALE-MARKET gold prices rose at the start of Asian trade on Monday, touching new all-time highs above $1476 per ounce before slipping 0.4% as world stock markets held flat and European Brent crude oil ticked back to $125 per barrel.
“The silver market went nuts,” according to one Hong Kong dealer, with “swift buying” pushing spot silver prices to a fresh 31-year high above $42 per ounce.
Broad raw material prices also pushed higher, taking the GSCI index of 24 investable commodities to the highest level since July 2008.
On the currency markets, both the Euro and Sterling held near last week’s new 2011 highs at $1.448 and $1.642 respectively.
That capped the price for European savers wanting to buy gold today, with the price in Euros unchanged from this point in each of March, Feb. and Jan. at €32,750 per kilo.
The gold price in Sterling edged back from Friday’s finish of £900 per ounce – the highest weekly close of 2011 so far.
“[Silver investment] is still claiming the most interest among the precious metals,” says Standard Bank’s weekly review of US futures trading, commenting on last week’s 8.2% price rise.
“Despite growing speculative activity, the silver market is not too stretched,” Standard Bank concludes, pointing to how investors’ bullish bets – net of that group’s bearish bets – now account for 19.5% of all open contracts on the US silver futures market.
“This [net long position] is well below the average level seen in 2010 [of] 23%.”
Also reviewing the latest Commitment of Traders report from US regulator the Commodity Futures Trading Commission, “It is odd that with the gold price now above $1470 per ounce, total net longs still languish more than 4 Moz [124 tonnes] off the record high set in…October 2009,” says the latest Precious Metals Weekly for ABN Amro published by the VM Group consultancy.
The price of gold 18 months ago was $400 per ounce lower, notes VM. So in the absence of strong gold investment via exchange-traded trust funds – now standing at the lowest level since June 2010 on VM’s archived data – “this implies that [London dealing] and physical trade has been very supportive to the price,” it reckons.
“A $50-100 per ounce move upward in the gold price can be expected,” it concludes, if US gold futures traders push the speculative Net Long position back towards its 2009 record.
Over in Japan meantime on Monday – where the number of open Tokyo gold futures contracts fell last week to a near 16-month low – a mid-sized earthquake coincided with 1-month remembrances for the 28,000 people missing or killed after March’s quake and tsunami.
The Yen rose sharply, knocking the gold price for Japanese buyers back 1.1% from a new 28-year high, and the Japanese stock market fell. A senior official with the International Monetary Fund – due to report its new 2011 economic forecasts today – was quoted by Bloomberg saying both Japanese and US growth has been sharply downgraded.
Car giant Toyota today announced a series of one-day shutdowns at its North American factories owing to a lack of components from Japan.
World nos. 1 and 3 respectively by annual GDP, both the US and Japan “lack credibility” in their government deficit reduction plans, the IMF official said.
Politicians in Washington “only deferred” a possible shutdown of government services, according to one analyst, by agreeing stop-gap budget cuts late Friday of $38 billion for the year-ending Sept. 30.
Monday saw US and other major government bond prices fall, nudging interest rates higher.
Like other “peripheral” European debt prices, however, Portuguese bonds ticked higher, pulling10-year interest rates for Lisbon back down from last week’s record Euro-era peak of 8.80%.
Adrian Ash
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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 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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