By From Adrian Ash
To End-Aug. as Physical Silver “Gets Tight” in Hong Kong
THE SPOT PRICE OF physical gold bullion touched its highest level since late-June’s record peak early in London on Wednesday, extending August’s record-high monthly close as world stock markets rose together with commodities and government bond yields.
New data showed rapid growth in Chinese manufacturing and Australian GDP.
Friday’s key US employment data was preceded however by the private-sector ADP Payrolls Report, which showed its first loss since March, down by 10,000 jobs against the 20,000 growth expected.
“We are in a bind,” writes Bill Gross of bond-fund giant Pimco in his new monthly outlook, urging fresh quantitative easing of mortgage-backed securities.
“Having grown accustomed to a housing market aided and abetted by Uncle Sam, the habit cannot be broken by going cold turkey into the camp of private lending…crippling any hopes of a housing-led revival to the economy.”
The Dollar dropped to a 1-week low vs. the Euro on the news. The Dollar gold price retreated from $1254 to $1249 an ounce.
“[Last night’s] $1247 is a new record-high monthly close,” notes Russell Browne in his technical analysis from bullion-bank Scotia Mocatta, “beating June’s $1241.
“Although gold price action is stepping up, we remain cautious around month end. [But] the bullish close increased the pressure for a test of the record high of $1265 and beyond.”
The gold price in Dollars ended Tuesday with its best August performance since 1986, gaining 6.6% for the month.
Year-on-year, last night’s record-high monthly finish saw gold stand more than 30% higher, its second-best August-to-August after 2006’s 43.9%.
“Gold convincingly broke through a downwards sloping trendline yesterday,” sayss a London dealer today. “The $1250 level now remains the last technical barrier to a return to the record highs of June.
“With September inflows expected, continued strength may be in store.”
“Also of note is a tightening in the physical silver market,” says Standard Bank’s senior commodity analyst, Walter de Wet, “with increased demand from mainland China absorbing much of the silver supply traditionally coming to the wider market from Hong Kong.”
Silver bullion traded in London touched a 16-week high of $19.55 an ounce on Wednesday – a level last seen at May’s 14-month peak.
World stock markets meantime shot higher, with London’s FTSE-100 gaining 1.5% by lunchtime.
In Athens, short-selling of Greek stocks was again allowed today, with the main index trading some 12% below the level of late-April, when a ban on “speculation” was imposed.
Alongside the Euro and Sterling, the Japanese Yen also rose again on the forex market, edging towards last week’s 15-year highs at ¥83.70 to the Dollar despite Tuesday’s announcement of €11 trillion ($127bn) in new fiscal and monetary stimulus.
“Too little, too late,” is how former Bank of Japan policymaker Noboyuki Nakahara described it.
Faced with flagging export sales, “The [Tokyo] government is running out of policy options with interest rates this low,” says CLSA’s Greed & Fear analyst Christopher Woods in Hong Kong.
Reversing Tuesday’s losses, the three central-bank reserve currencies knocked the gold price back by 1% from near two-month highs at £816 per ounce, €31,687 per kilo and ¥3145 per gram respectively.
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 mining-industry’s World Gold Council – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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