London Gold Market Report

Gold Jumps into New Year as Oil Prices Rise, Asian Stocks Fall; Experts Forecast New Records in 2008
 
THE SPOT GOLD MARKET for immediate delivery rose strongly in Asia early Wednesday, gaining more than 1% to recover Monday’s two-month highs and recording an AM Fix of $840.75 per ounce as London re-opened for business after the New Year’s holiday.
Gold Jumps into New Year as Oil Prices Rise, Asian Stocks Fall; Experts Forecast New Records in 2008
 
THE SPOT GOLD MARKET for immediate delivery rose strongly in Asia early Wednesday, gaining more than 1% to recover Monday’s two-month highs and recording an AM Fix of $840.75 per ounce as London re-opened for business after the New Year’s holiday.
 
In Tokyo the Nikkei stock index dropped 1.6% on the first trading day of 2008, while Chinese stocks ended the session almost 1% lower.
 
European shares rose however, led 0.6% higher on average by mining and energy stocks as crude oil rose above $96 per barrel.
 
Oil prices rose nearly 58% in 2007, while the Gold Market added 36.5%. Energy analysts are now awaiting data on US oil stockpiles, due out on Thursday. Today brings US construction & manufacturing data for Nov. and Dec. respectively, with Wall Street forecasting a drop in both measures.
 
Weakening US data helped push Treasury bond returns to 9.1% in 2007 according to analysis by Merrill Lynch & Co., even as inflation rose worldwide. Minutes from the US Federal Reserve’s latest meeting – when it cut Dollar interest rates to 4.25% – are due today at 14:00 EST. Tomorrow and Friday will bring a slew of US employment data.
 
Early Wednesday, the United Kingdom reported sharply lower manufacturing figures for Dec., helping to push the British Pound back towards last week’s four-month lows beneath $1.98.
 
That sent the Gold Price in Pounds Sterling to new all-time record highs above £424.50 per ounce. Gold gained 31% last year for British investors, its seventh annual gain on the run.
 
"Britain this year faces the most difficult economic conditions since the dotcom bubble burst," says the Financial Times today in its annual survey of 55 leading economists.
 
"Nearly nine in 10 think public finances are not in good order," says the paper. "The third most-mentioned risk to the economy is inflation, limiting the ability of the Bank of England to cut interest rates.
 
"Nearly two-thirds of the economists – from the City, academia and including five former members of the monetary policy committee – thought house prices would fall this year."
 
For European investors wanting to Buy Gold Today, the price hit €574 per ounce as London opened and the single Euro currency recovered $1.4650, a little over 2% below its all-time record above $1.4950 hit in late Nov.
 
The Euro gained nearly one-fifth versus the US currency last year, but the Gold Price in Euros also rose, gaining more than 21%. That disproves the common belief that gold and Euros move in sync.
 
Indeed, the Gold Price measured against the world’s five most important currencies – the US Dollar, Euros, Yen, Pound Sterling and Canadian Dollar – has now gained more than 150% since the start of this decade.
 
"With continuing concerns for increased inflationary pressures and global security tensions, coupled with a still weak outlook for the US Dollar, gold is likely to continue to perform well in 2008," says Standard Bank in its daily report today.
 
"It is more likely than not for gold to set new records in the coming year."
 
"We believe the story for gold is still a bullish one in the short term," agrees Investec in Australia.
 
"With the US Dollar still very much under pressure, geopolitical tensions rising and of course with the start of a new quarter comes the reallocation of fund money which will more than likely see gold in favor."
 
Adrian Ash
 

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 ? where you can Buy Gold Today vaulted in Zurich on $3 spreads and 0.8% dealing fees.