London Gold Market Report
Fri, May 15 2009, 12:54 GMT
by Adrian Ash
Gold Nears Best Weekly Finish in Six as US Inflation Rises, Life Insurers Get TARP Relief, "Crisis Not Over"
THE PRICE OF WHOLESALE GOLD held steady against most major currencies Friday AM, gaining for the second week running and nearing its best Dollar finish since late March at $928 an ounce.
US stock-market futures pointed lower, meantime, as Consumer Price data showed a faster-than-forecast rate of inflation for April, up 1.9% year-on-year excluding fuel and food.
Six major US life insurers were granted access to the Troubled Asset Relief Program (TARP), which now contains $110 billion of the initial $700bn in rescue funds.
"It was mainly speculative buying that moved the metal upwards," says Wolfgang Wrzesniok-Rossbach, senior analyst at German refining group Heraeus, pointing to this week's 2.1% spike to $930 – a six-week high – in his latest Precious Metals Weekly.
"Dealer-interest was certainly rekindled by the moves in currencies and oil. The largest Gold ETF also recorded a tiny plus – the first one since 9th April."
"In contrast, interest in [physical] Gold Bars this week was again very mellow."
Heading into the typical summer lull in Indian Gold Demand – destination for one ounce in every five sold worldwide last year – "Nothing is happening. Demand is very dull," said a Mumbai bank dealer to Reuters earlier.
"Since the start of the week, demand has dried up," said another.
"I don't see demand re-emerging until gold hits 14,300 Rupees per 10 grams – about $900 an ounce," said a third.
Further ahead, however, HSBC's chief commodities analyst James Steele this week raised the bank's 2009 Gold Price forecast, up from an average of $825 an ounce to $875.
So far this year, the Dollar-price for investors Ready to Buy Gold has averaged $905 an ounce.
"Inflation fears are supporting gold," reckons Steele, and "possible US Dollar weakness remains a potential source of support.
"Stagnant mine output, reduced official sector sales, and robust ETF and retail demand are also supportive."
On the data front Friday morning, the 16 Eurozone nations reported a much worse than expected drop of 4.6% in economic output for the first quarter compared with Jan. to April 2008.
Germany's GDP shrank almost 7% year-on-year, the sharpest fall since 1970.
Frankfurt's Dax index of German stocks neared the Friday close 4.5% lower from last week, while the US currency rose against both the Euro and Sterling but lost ground to the Japanese Yen, trading ¥4 down for the week just below ¥95 per Dollar.
Crude oil fell below $58 per barrel. Government bond prices ticked higher.
The Gold Price in Euros rose to €685 per ounce, just shy of its 2009 average to date at €690.
"If I'd put it in the stock market, I could have lost the lot," says Clark Berger, a private investor in London who's made near-35% gains in gold since August, speaking to Reuters.
"If I'd put it in a bank, it could have gone bankrupt. If I'd stuck it under my mattress, I could have been robbed and had nothing left."
Instead, Mr.Berger chose to Buy Gold, turning £39,400 into £52,500 ($79,250) in eight months by using the award-winning BullionVault service.
"This crisis is not yet over, and there will, in all likelihood, be further tests ahead," said head of the International Monetary Fund (IMF) Dominique Strauss-Kahn at a conference in Vienna this morning.
"Financing conditions have remained tight and credit growth to the private sector has decelerated," said European Central Bank (ECB) vice-president Lucas Papademos at the same event Thursday, "partly as a consequence of the deleveraging of banks’ balance sheets and persisting stresses in the bank wholesale funding markets."
Barclays Bank was meantime rumored to be selling its Barclays Global Investors asset-management division for some $10 billion, while Temasek – the Singapore state's investment managers – said it quit its entire stake in Bank of America during the first 3 months of this year, taking a net $3bn loss on its initial $6bn outlay.
Over in Dubai, "There remain a number of serious concerns, namely a staggering amount of unpaid fees, which our soundings indicate are around £400m [$600m]," said Nelson Ogunshakin, chief executive of the Association for Consulting and Engineering (ACE) to The Telegraph today, after writing to the UK business secretary Lord Mandelson to ask for "political intervention" in reclaiming unpaid money from property developers in the Middle Eastern city.
The United Arab Emirates' biggest developer, Nakheel, is said to be offering just 65 cents on the Dollar to its UK contractors after the real estate market collapsed but its key projects – such as the Dubai Palm and kilometer-tall Burj Dubai tower – remain unfinished.
