London Gold Market Report – Forex Hound

Gold Hits New Highs vs. Dollar, Euro & Sterling as South Africa Suspends All Gold Mining
 
SPOT GOLD PRICES rose 1.3% overnight Friday, reaching new all-time highs above $923 per ounce as all gold-mining operations in South Africa – the world’s No.2 gold producer – were shut down by a power shortage.
London Gold Market Report
from Adrian Ash
07:25 EST, Fri 25 Jan.
 
Gold Hits New Highs vs. Dollar, Euro & Sterling as South Africa Suspends All Gold Mining
 
SPOT GOLD PRICES rose 1.3% overnight Friday, reaching new all-time highs above $923 per ounce as all gold-mining operations in South Africa – the world’s No.2 gold producer – were shut down by a power shortage.

State-owned energy firm Eskom today told mining giants AngloGold Ashanti, GoldFields and Harmony that it can not guarantee current power supplies to their mines.

 
"This will have an impact on productivity as well as on operating costs," said the Chamber of Mines in Johannesburg. "It is not clear when the workers will resume their underground shifts."
 
Eskom said last month it cannot supply any new energy-intensive projects, including new mines, until 2013. The South African government today declared the power outage "a national emergency".

By lunchtime in London today, gold had also hit a series of new record highs against all other major currencies barring the Canadian Dollar and Japanese Yen.

 
Physical Gold for immediate delivery broke €628 for European buyers, £466.50 for British investors, and it reached $1,047 against the Australian Dollar.

European stock markets meantime rose 1.5% while Asian-Pacific stocks ended the day more than 4% higher on the MSCI index.

 
But despite Tokyo’s best one-day performance since 2002, the Nikkei index still finished the session 1.7% lower from last Friday’s close, and Japanese equities remain more than 7% below their start of this month.

The broad FTSE Eurofirst index remains one-tenth below its start of Jan. 2nd.

"The massive retracement in the stock markets on Monday, as in the past, led to gold losing ground," writes Wolfgang Wrzesniok-Rossbach in today’s Precious Metals Weekly from Heraeus, the German refining group.

"Keeping in mind gold’s role as a ‘crisis metal’, this seemingly irrational behavior is perhaps explained by the market having to find quick liquidity to settle losses elsewhere. For next week we expect this relationship between the stock markets and gold to continue.

"However, we expect gold to continue its upward move…perhaps getting as far as $975 an ounce in this first quarter of 2008, before it comes under pressure from a global recession later in the year."

Priced against the Swiss Franc, Gold today broke its high of two weeks ago to reach CHF1,009 per ounce.

The metal has now doubled since Jan. 2004 against the formerly gold-backed Swiss currency.

Over at the Tocom in Tokyo, all Gold Market futures contracts leapt by ¥120 per gram – the maximum "limit up" permitted by the exchange. Trading in gold for delivery in Dec. ’08 closed at the equivalent of $920.86 per ounce.

On the currency markets, the Yen continued to weaken from Wednesday’s 30-month high vs. the Dollar. The Japanese currency also ticked lower against the British Pound, standing 4% below this week’s 19-month highs despite a raft of bad news for UK investment confidence.

A parliamentary report due out tomorrow will blame the City of London’s watchdog – the Financial Services Authority – for failing to spot the flaws in Northern Rock’s business model, reports the Financial Times.

When the global credit crunch first bit last summer, the over-geared mortgage lender suffered the UK’s first banking run in 130 years. Alistair Darling, the UK chancellor, also "takes flak" in the official report, says the FT.

The European single currency meanwhile ticked 0.4% lower against the US Dollar, and crude oil broke back above $90 per barrel in early trade, rising by more than 4% from Wednesday’s low as Washington agreed a series of tax rebates aimed at stimulating the US economy.

 
US government bonds remained unchanged after capping their own two-day decline overnight, and "I plan to buy" said a trader at Mitsubishi in Tokyo to Bloomberg today.
 
"The US economy is weak. Treasuries are still a safe haven."

But Treasury bond prices are now so high, the 10-year note pays 0.4% less than the latest reading of US consumer-price rises. Two-year US bonds offer to pay a negative yield of 1.83% per year after inflation

 
 
 
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.
 
(c) BullionVault 2008
 
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
 
 
 

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.