Posted on 01/04/2010 2:54:49 PM PST by blam
Gold Jumps As Fed Comments Hit Structurally Weak Dollar
Commodities / Gold and Silver 2010
Jan 04, 2010 - 11:17 AM
By: Adrian Ash
THE PRICE OF WHOLESALE GOLD jumped higher in Asia and early London dealing on Monday, kick-starting 2010 with a 1.8% gain to hit two-week highs as world stock markets rose together with base metal and energy prices.
Government bonds fell, as did the US Dollar – down to $1.44 per Euro by mid-afternoon in Frankfurt.
The Bank of England meantime reported a sharp decline in Britain's money-supply growth.
Investor sentiment across the Eurozone rose to its best level since May 2008 on the Sentix survey, but still lagged analyst forecasts with a negative reading.
"There were different reasons for [gold's 2009] gains," notes Swiss refiner MKS in a note. "For physical gold, it was mostly buying interest by investors and speculators and buybacks of hedging positions by the [mining] producers.
"Also, national central banks became buyers. China, India, Russia and Mauritius stocked up on their gold reserves."
Looking ahead to 2010, Standard Chartered's Helen Henton – the most accurate 2009 forecaster in Bloomberg News' survey – said gold bullion will continue to rise on "central-bank buying, the structural change in interest for gold from retail investors, and in the second half the resumption of the weakening trend in the Dollar."
Henton sees the gold price averaging $1150 this year – up from the 2009 average of $974 per ounce – before rising again to $1300 in 2011.
Shorter-term, the first week of the New Year brings a flood of key US data, starting today with the ISM Manufacturing Index.
"Most notable is Friday's US non-farm payroll data," says commodities analyst Walter de Wet at Standard Bank, noting that the much better-than-expected November report was "instrumental in triggering the current Dollar rally.
"With gold close to $1100, dips are likely to be bought [and] we continue to see physical buying in the gold market...As we head into Q1 (a low seasonal period) we could see this demand slow [but] overall we still believe gold will trade higher in 2010."
Recording the first London Gold Fix of 2010 at $1113 per ounce, gold stood 28% higher from the start of 2009 and 294% above the AM Fix of Jan. 4th a decade ago.
US crude oil contracts meantime broke above $81 per barrel early Monday, following news of the worst snowfall in Beijing and Seoul for 50 years, plus an unresolved dispute between Russia and Belarus over export duties on supplies destined for Europe.
The US National Weather Service forecast two weeks of "below-normal" temperatures for the eastern United States. They account for well over 80% of national heating oil demand.
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