INTERNARIONAL. The price of gold slipped for the second day running for Dollar investors early in London on Friday, nearing the weekend 1.7% above last week's finish as commodities fell, government bonds rose, and world stock markets dropped.
Gold priced in British Pounds hit a new all-time record at the AM Gold Fix of £690.83 per ounce.
Agreed as a clearing and benchmark price twice each day, the Fix has risen by 280% for UK gold buyers from this time 10 years ago.
"We do not expect much direction from currencies," says today's gold-market comment from Standard Bank analyst Walter de Wet.
"In fact, correlations between commodities and the Dollar have fallen substantially. Look to equities for direction."
The price of gold has risen by 19% vs. the Dollar since the start of Sept. Priced against a basket of currencies, the Dollar itself has lost 4.5% of its value since then.
The S&P 500 index of US stocks has risen 7.3% in that time.
Today world stock markets slipped back, dropping for the seventh day out of 15 trading sessions in November so far.
Silver traded wholesale in 1,000-ounce bars slid further from Wednesday's 16-month high, recording a London Fix of IS$18.18 and dropping almost 4.0% in 48 hours.
"Raise interest rates with 15 million jobless and 25 million part-time working Americans?" writes Pimco bond-fund giant Bill Gross in his latest Investment Outlook.
"All because gold is above US$1100? You must be joking or smoking something.
"We will need another 12 months of 4-5% nominal GDP growth before Bernanke and company dare lift their heads out of the 0% foxhole – mini-bubbles or not."
The Bank of Japan today kept its key interest rate at 0.1%. It was first cut below 1.0% per year in 1995.
Thursday's action saw the nominal return offered by US Treasury bills maturing in January drop below 0%, the first such sub-zero yield – before accounting for inflation – since Dec. last year.
Morgan Stanley economist Ted Wieseman attributes the sub-zero yields, caused by surging prices, to "investors stash[ing] money over year-end."
Last week's US consumer-price data showed inflation running above 2.5% annualized.
"The biggest threat to the gold price in 2010 will come from macroeconomic factors," warn VM Group analysts Matt Turner and Carl Firman today, "such as a concerted effort by the US government to rein-in the money supply and support the Dollar.
"[That] possibility, however, is remote in our view."
Estimating that the physical gold market will see demand lag supply by at least 282 tonnes in 2009, "We anticipate the surplus may be repeated in 2010," say VM, launching its latest Yellow Book of data and analysis on behalf of BNP Paribas Fortis.
"A recovery in jewelry demand [will be] offset by a decline in dehedging and a further increase in mine supply. Price direction will again depend heavily on investors’ willingness to add to their holdings."
Commenting on Europe's financial outlook, "Euro area governments...have committed 26% of GDP to supporting the financial sector," noted European Central Bank chief Jean-Claude Trichet in a keynote speech this morning in Frankfurt.
"The total amount of outstanding ECB refinancing [to commercial banks] is around 60% larger than it was before the market turmoil. This reflects also the need for the ECB to 'intermediate' parts of the money market."
New data today showed Germany's wholesale price index holding flat in October, defying market expectations of a slight increase as the rising Euro undid crude oil's jump in Dollars.
Eurozone interest rates now stand at 1.0%. Today the gold price in Euros held €1 shy of yesterday's nine-month high at €770 an ounce.
Eurozone investors looking to buy gold have seen the price rise 15% since the start of Sept. this year and more than 135% since Nov. 2004.
Note. 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 – winner of the Queen's Award for Enterprise Innovation, 2009 – where you can Buy Gold Today vaulted in Zurich on US$3 spreads and 0.8% dealing fees.
