re: gold commentary The following is a copy of last night's commentary by the World Gold Council (shortly after the commentary was emailed out to subscribers, Kitco was quoting gold @$373.90.
------------------------------------------------------Trading
After a few days consolidating in the $365-373/ounce range, gold closed in New York last night at just over $371/ounce
on the back of steady professional buying interest (see above) and then broke through the $373 resistance in the Far
East. TOCOM was again heavily traded, with open interest increasing by a further 20t to 473.7t. The market is clearly
focusing on the US Secretary of State’s presentation to the UN tomorrow, but in the Far East particularly, the market is
also acutely aware of the tensions concerning North Korea. On a more technical basis, gold prices were propelled
higher in Tokyo by a weaker yen (partly prompted by comments from the Japanese Prime Minister about possible
interest rate cuts), which prompted some short covering and technically-driven purchases (i.e. buy orders that are preordained,
usually by computer programmes, to trigger at certain prices). Although conditions are heavily overbought,
the political environment continues to bolster investor interest and in nervous conditions no-one is prepared to call a
top.
We fixed this morning at $374.85/ounce , the highest US dollar price since 28th November 1996.
Market factors
The dollar and the Dow both registered gains again yesterday, although the prevailing political climate meant that
Dow’s move (+56 to 8,109) was relatively muted given that the economic figures yesterday were encouraging; the
dollar is also now coming under renewed pressure in Europe today ahead of the UN meeting tomorrow. The dollar:yen
rate continues to strengthen, however, as Japan addresses its own issues and speculates over the identity of the next
governor of the Bank of Japan (the Prime Minster is due to make an announcement on or around February 20th).
US construction spending in December was strong, driven again by private home building; spending was up almost
1.2%, the largest gain since last February. Permit figures were strong in the latter part of last year also, and residential
construction continues to have a relatively robust outlook, thus maintaining its position as one of the mainstays of the
US economy.
The Institute for Supply Management, meanwhile, reported its business index at 53.9% after 55.2% in December, which
implies an improvement in activity, (index > 50%), but clearly at a slower rate than in the previous month.
Nonetheless, the figure outstripped market expectations; the call had been 53.9%.
Background News
The First Deputy Chairman of the Central Bank of Russia, Oleg Vyugin, said yesterday that, subject to some extent to
oil prices, he expects Russian gold and foreign currency reserves to reach approximately US$55Bn by the end of this
year (they started the year at $47.3Bn). He also said that gold should account for a minimum of 10% of the bank’s
combined gold+foreign exchange reserves and that "Basically we are satisfied with the amount of gold that we have
now”. At the start of the year Russian the value of gold holdings was reported as $3.74Bn, implying 387 tonnes (Russia
values its gold at $300/ounce), unchanged from earlier in the year; this figure amounts to 8% of total.
The investment banking arm of Dresdner AG, Dresdner Kleinwort Wasserstein, has announced that it is to extend its
web-based trading platform to offer online spot trading for non-physical gold, against US dollars, the euro and the
Australian dollar, during London, New York and Sydney hours.
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