With Gold currently trading @$372.90 (10:16pm), here is tonight's commentary from the World Gold Council.
The ICICI decision may well prove an impetus for physical gold whilst speculation and a flight to fear (or, perhaps not) continues to account for 80 -90% of the price momentum in gold's daily movements (my thoughts, only).
The long-awaited correction well and truly took place yesterday as the markets responded to Colin Powell’s presentation to the UN. Quite an illustration of the old adage “buy the rumour, sell the fact”. Dealers have been saying for days that the market was over-bought, but persistent professional buying interest in the back of political and economic tension had deterred most would-be sellers. After yesterday’s constructive action in London (re-testing the highs), New York started to weaken before the Secretary of State started his presentation, and then profit taking triggered liquidation. With the physical market still largely sidelined, there was little grass roots buying interest and the price dropped to $367/ounce before professional buying appeared and the market started working its way higher, closing just above $375/ounce. New York activity was frantic, with the price dropping by more than $5 as many minutes at one point. Volumes were heavy, with over two million ounces traded during the session, and in excess of half million on ACCESS thereafter. The Far East saw heavy selling on TOCOM, but also witnessed physical buying support on approaches to $370/ounce. This has been continued in Europe this morning and the market is currently steady but nervous, with the bid-offer spread standing at a full dollar.
Market factors
While the markets generally espoused the view that Colin Powell’s speech did little to change the status quo, the Dow closed 28 points lower at 7,985. Both the stocks and the dollar were volatile, as the markets wrestled with continued uncertainty.
In the background the Institute for Supply Management released reasonably encouraging figures. The nonmanufacturing index for January was broadly in line with expectation, reading 54.5% (54.2% in December), with the new orders index at 56.2%, up from 54.6%.
In Japan the major banks are reporting sizeable equity market losses in the December quarter of 2002 and this has again raised questions about capital adequacy.
Meanwhile the ECB meets today and the markets are taking the view that in the midst of political uncertainty the Bank will keep interest rates on hold, but that a cut is almost inevitable in the medium-term.
Background News
ICICI Bank in India is about to launch a range of gold bullion products, including ICICI Bank gold accumulation plans, gold accounts for private investors, lending facilities for local manufacturers, and spot and futures trading. The bank expects to have 200 branches with gold retail facilities by the end of this year. The bank is already selling ICICI gold coins, which were launched last December and are the first retail gold investment products to be sold by a local Indian bank.
