Gold News

Gold Ticks Up as Eurozone Inflation Soars, Confidence Sinks; Asian Stocks Close Out Worst Quarter in 6 Years

Spot Gold Prices gave back half of an early 0.8% gain in London on Monday morning, nearing the end of the first quarter almost 12% higher against the US Dollar as Asian stock markets closed out their worst three-monthly performance since 2001.

British investors wanting to Buy Gold today saw it break £472.50 per ounce, while the Gold Price in Euros touched €592.

European stocks sank 1.5% before crawling back to break-even by lunchtime.

"It is the last day of the quarter," notes Mitsui, the precious metals dealer, this morning, "and with all four precious metals [gold, silver, platinum and palladium] consolidating after the recent correction in prices, it may be a quiet day.

"The technical outlook for gold is fairly neutral in the short term with support at $928 and resistance coming in at $940."

Crude oil meantime slipped to $104.34 per barrel in early trade – down 1.2% for the session but 7% above New Year's Eve – after the leader of Iraq's militant Mah'di army called for a truce with government forces.

Base metals also sold off – and bond prices ticked lower – as professional investors worldwide awaited details of the "Paulson Plan" for regulating the US financial markets.

The 200-page document is expected to grant the Federal Reserve formal powers to bail-out failed institutions such as Bear Stearns in a new role as "market stability regulator".

Back in the Gold Market, "we have very strong supply and demand fundamentals," reckons Evy Hambro, head of BlackRock Merrill Lynch Investment Managers.

"It takes two, three or four years to build a mine, so you can't just turn a tap and produce more commodities. I would say that Gold Prices are going to continue in a positive direction."

Bouncing from Friday's three-day lows against the US Dollar and British Pound, today's Morning Gold Fix here in London held steady against the European single currency, even as the Euro rose sharply on the forex market.

Sterling dropped to a new 11-and-a-half-year low beneath €1.25 per Pound, down by 17% since the global banking crisis began in August.

Versus the Japanese Yen, the US Dollar slid back towards ¥99.30, helping depress Tokyo-listed export stocks as Japan's fiscal year came to an end today.

Hong Kong-listed stocks ended the first three months of 2008 more than 18% lower. The index of mainland Chinese "H share" equities closed 25% below its level of New Year's Eve.

Globally, investors have pulled some $98 billion out of equity funds so far this year, according to analysts at Emerging Portfolio Fund Research.

Their number-crunching pointed to positive inflows of $19bn during the first quarter of 2007. The first three months of 2006 saw equity-fund allocations rise by $49bn worldwide.

Commodity funds saw net inflows of $3 billion between Jan. and March this year, says EPFR – a three-fold increase on the first quarter of 2007.

A recent study by Russell Investments says only 6% of North American pension funds are actively investing in commodities. One-fifth of respondents said they are looking to trade commodities directly – rather than "passively" through commodity-based funds.

The biggest US investment fund – the California Public Employees' Retirement System (Calpers) – last month allocated 3% of its $240 billion portfolio to commodities.

"Why would we overlook any potential strategy that would give us good returns?" asks Clark McKinley, a spokesman for the fund.

Wheat prices slipped 1.5% in the first-half of London trade, but soybeans remained on track for their sixth quarterly increase in succession on rumors that China may increase its soybean imports after storms damaged its domestic rapeseed crop.

Surging commodity prices helped push inflation in the 15-nation European monetary zone in Feb. to a new post-union record of 3.5% year-on-year.

Money supply growth in the Eurozone meantime continued above 11.3% per year, holding near the three-decade records of late 2007.

Economic confidence in the Eurozone slipped in March, however, down for the fourth month running according to the European Commission.

Confidence in the financial services sector plunged to an all-time low.

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Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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