21 April 2011

Shift to Physical Accelerates as Gold Rises in Dollars Only, Silver Adds 7.7% for the Week

The Wholesale Price of gold broke fresh US Dollar highs ahead of the long Easter weekend

THE WHOLESALE PRICE of gold broke fresh US Dollar highs ahead of the long Easter weekend in London on Thursday, but fell against all other major currencies, unwinding this week's sharp gains entirely for Euro buyers.

The price of gold in British Pounds slipped 1.4% from yesterday's new all-time highs.

Silver prices extended their Dollar gains to 7.7% for this week alone, breaching $46 per ounce and also reaching new multi-decade and all-time highs vs. the world's other major currencies.

Goldman Sachs yesterday raised its margin requirements for clients wanting to sell the SLV iShares Silver ETF short to a three full percentage points.

Bullion bank Scotia Mocatta on Wednesday adjusted its "registered" and "eligible" stockpiles at Comex depositories, holding back more than $225m of bullion from being deliverable against futures contracts in a fully client-owned position.

London-listed GBS – the UK's first exchange-traded gold ETF – today reported its fifth redemption of shares in exchange for physical bullion in as many weeks.

"One unidentified company has the potential to own up to 89% of the lead in warehouses monitored by the London Metal Exchange," Bloomberg reports, "a position worth $704 million at the current price."

China's state-owned Sinopec oil giant meantime suspended all exports of refined oil products, according to the state-run Xinhua news agency, aiming to "to maintain domestic market supplies of refined oil products".

"Rather than continuously roll the futures contracts, it just became easier and more economical for us to take...the bullion," said University of Texas investment officer Bruce Zimmerman to CNBC on Wednesday, explaining the US's second-largest academic fund's decision to switch from gold futures to a fully allocated gold position.

"The role gold plays in our portfolio is as a hedge against currencies," Zimmerman said, noting UTIMCO's large fixed-income exposure.

"The concern is that we have excessive monetary and fiscal stimulus."

The Euro today hit a new 16-month high vs. the Dollar at almost $1.4650, while world stock markets rose together with major-government bond prices.

US crude oil ticked above $112 per barrel.

"The key element determining gold's near-term direction right now is the US Dollar," Bloomberg quotes Edel Tully at Swiss banking giant UBS's London office.

"[But] sovereign debt concerns in US and Europe, along with inflation fears, provide a good backdrop for gold."

The International Monetary Fund said yesterday that the global banking sector faces a "wall of maturing debt" totaling $3.6 trillion in the next two years.

Last week it said that developed-world governments have to raise 27%-worth of their annual economic output from the bond markets in 2011, "heightening competition for scarce funding resources."

Adrian Ash
BullionVault

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 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2011

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.


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