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London Gold Market Report

Thu, Oct 15 2009, 12:58 GMT
by Adrian Ash

BullionVault.com  |  View company's profile

Gold Falls Hard, UK Pound Leaps; Still "Early Days" for Quantitative Easing as Goldman Pays Staff 78% More than Stockholders

THE PRICE OF GOLD fell sharply on Thursday morning in London, losing 2% from yesterday's new record high to unwind all of the week's gains-so-far for Dollar investors.

European shares ticked lower and New York equity futures pointed down after the Dow Jones index closed last night above the 10,000 level for the first time in 12 months.

Government bonds also fell, pushing yields up to 3.28% on 10-year German bunds.

US crude oil contracts held steady at $75 per barrel.

"At current price levels, there is little appetite in the physical gold market," reports Standard Bank in its daily note.

"Scrap selling continues, which is adding to the resistance at $1070."

Forecasting a gold price of $1200 by year-end, however, Douglas Horn of New York's CPM consultancy group told an audience in Singapore today that "Investors perceive gold as an asset class to hedge against [economic] volatilities.

"In the past years, we used to see retail investors coming to the market to buy gold," Horn's quoted by Bloomberg, "but now we're seeing a large scale of institutional investors participating in the gold market.

"That's a significant change."

Back in Thursday's early gold action, the price for Euro investors fell 2.3% from Tuesday's high – its best level since mid-March – to trade at €704 an ounce by lunchtime in London.

Gold priced in Sterling also fell to a two-week low, down to £645 an ounce, as the Pound rose sharply on the currency market following comments from a Bank of England executive.

"Personally I feel much more confident now that the asset purchase programme is having the scale and speed of impact that we would have hoped for when we started," said the Bank of England's director for markets, Paul Fisher, in an interview with the Financial Times published today.

The UK's quantitative easing – now equal to the government's entire deficit for 2009 to date – is "still only seven months in," Fisher added, "so it is still very early days."

Meantime in New York, US securities giant Goldman Sachs posted even better-than-expected third quarter results, almost tripling its common-stock dividend from the same period last year.

Staff compensation was 78% greater again than the money paid out to stock holders, equal to nearly half the former investment bank's total revenue.

Over in Hong Kong, a Chinese buyer set a new world record for real-estate prices, paying $57 million for a duplex apartment.

Back here in London, luxury department store Harrods began selling gold coins and bars in its famous Knightsbridge store, telling reporters that "The financial environment has kindled a new demand for physical gold among private investors in Britain.

"Harrods saw the opportunity to help individuals buy physical gold in a prudent manner."

Harrods' new gold department told BullionVault by phone today that its premium on Krugerrand gold coins is currently set 11% above spot price – more than twice the average mark-up already paid by retail investors using typical US and European coin dealers.

Published on  Thu, Oct 15 2009, 12:59 GMT