By From Adrian Ash
“Discouraged” by Strong Euro-Debt Demand as Bloomberg Users Call Gold “A Bubble”
THE PRICE OF PHYSICAL gold in wholesale bars fell to new multi-month lows against all major currencies on Tuesday morning, dropping to $1325 per ounce as Asian speculators hit what one Hong Kong dealer called “capitulation and panic”.
Currently 5.9% lower from the last day of 2010, the gold price in Dollars has suffered equal or sharper 3-week losses in 17 of the last 55 months.
“Recent positive sentiment regarding Eurozone peripheries [has] weighed on precious metals prices and discouraged safe-haven buyers,” reckons KBC Bank in a note.
The Eurozone’s new “stabilization fund” today drew €43 billion of demand for just €5bn-worth of bonds, issued to help fund Ireland’s bail-out.
Several fixed-income analysts cited strong bids from Asian central-bank and sovereign-wealth fund managers. A new issue of Spanish government debt also found good demand, with the interest-rate charged by investors sliding from 1.8% at the last auction to 1.0% on 3-month bills.
Versus a rising Dollar, Brent crude oil meantime lost 1.2% in London trade, while copper prices dropped 2.5% and Silver Bullion lost 5.0% from Monday’s high to trade at an 8-week low of $26.60 per ounce.
Tokyo equities rose after the Bank of Japan held interest rates below 0.1%, but other Asian stock markets fell and European shares also ticked lower.
“The economy will probably emerge from its slump soon and return to a moderate recovery path,” said Bank of Japan governor Masaaki Shirakawa at his monthly press conference on Tuesday morning.
Pressing ahead with another $60 billion-worth of “quantitative easing” asset purchases, the Bank of Japan has now held its key lending rate at or below 0.50% since March 2001.
Measured in Japanese Yen, annual economic output has shrunk by more than 4% in the last 10 years.
New UK data today showed the British economy shrinking by 0.5% in the last 3 months of 2010, defying analyst forecasts of 0.5% growth.
The Pound slumped 2.5¢ on the news, reversing the last two weeks’ gains to hit $1.5750.
Gold priced in Sterling rose from a fresh 3-month low to trade above £842 per ounce.
The gold price in Euros continued to fall, in contrast, touching new 12-week lows beneath €31,250 per kilo.
“Gold is in a bubble” reckon more than half the 1,000 Bloomberg data and news-feed terminal users responding to the news-wire’s latest quarterly survey.
Nearly twice-as-many respondents say they will cut gold positions by July as say they will increase them. The SPDR gold ETF – the world’s largest exchange-traded gold trust – yesterday shed 10 of the 21 tonnes it regained on Friday, slipping back to 1260 tonnes of gold bullion, held at HSBC Bank to back the value of its shares.
All told, the volume of gold investment made through formal, regulated exchanges shrank by 1.3% in the week-to-last-Tuesday, says London’s VM Group in its latest Precious Metals Weekly for ABN Amro Bank.
“The decline was led” by a near-7% drop in the net bullish position held by [institutional] Large Speculators,” says VM, “which hit its lowest since July 2009.”
In silver, in contrast, Large Speculators such as hedge funds and other professional investors have actually grown their net bullishness in the futures market. But that’s been “more than offset…by a large decline” in Small Speculator positions held by private individuals.
Meantime in India – the world’s No.1 physical gold-consumer market – “Some suppliers are now charging premiums of $2 [per ounce above the London benchmark] as there is a big fight in getting supplies,” a bank dealer in Mumbai told Reuters overnight.
“If we place an order now, we get delivery only in 3-4 days.”
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-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
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