Monday, January 26, 2009

FT - Gold pushes above $900 in buying spree. GDX, AUY, GLD

It is only recognition of the beginning of US Dollar and other FIAT currencies debasement. US Dollar has broken down today and Treasuries continued selling off.
Strong investor buying on Monday pushed the price of gold above $900 a troy ounce, hitting a 3½-month high in dollar terms and posting all-time highs in euro and sterling, in a stark sign of money seeking refuge from equities and bond markets.
Traders said that investors, particularly in continental Europe and the UK, were pouring money into gold exchange-traded funds – a popular way to gain access to the metal – and also noted strong buying of physical gold, from coins to bars.
Edel Tully at Mitsui & Co Precious Metals in London said gold was the “obvious shelter” for safe-haven investors.
In London, spot gold rose to $915.30 an ounce, up from New York’s last quote on Friday of $898.40. The precious metal also hit an all-time high in both sterling at £661.55 an ounce, and in euros, at €701.55 an ounce.
The total amount of gold held by the world’s gold ETFs last week rose for the first time above the 40m ounce level. Together, such investment vehicles are now the largest holders of physical gold after the official reserves of the US, Germany, the International Monetary Fund, France and Italy.
“The aggressive appreciation in the ETF contracts ... is the clearest signal to date this year that gold is one of the limited assets that investors want exposure to during these frantic times,” Ms Tully said.
John Reade, a precious metal strategist at UBS in London, added that the change in ETF gold holdings so far this month, at plus 2.5m ounces, was “impressive”, but he warned that the figure fell short of the 6m ounces achieved in mid-October, following the collapse of Lehman Brothers.
ETF Securities, which provides commodity-based exchange-traded funds, said it saw record inflows last week, with $500m invested in its products in just two days.
Hector McNeil, managing director at ETF Securities, said that about 60 per cent of those inflows were into the yellow metal. “Gold is set to rise dramatically,” he said.
Tanaka Kikinzoku Kogyo, Japan’s biggest bullion house, said on Monday that sales of gold coins jumped 121 per cent last year as investors flocked to the safe-haven metal.
Traders and strategists cautioned, however, that jewellery demand was weak and noted that old gold in the form of scrap was returning to the market, particularly in India, potentially capping any price gain.
James Steel, a precious metals analyst at HSBC in New York, added that the global economy risked falling into deflation, a situation in which “historically, gold has never rallied for a sustained period”.
Mr Steel forecast gold prices at $825 an ounce on average in 2009, with any rally towards $1,000 an ounce short-lived.
In the short term, traders said gold was likely to consolidate above $900 an ounce this week and could test the $930 an ounce level previously touched in October.
Spot gold in London, the market’s benchmark, hit an all-time high of $1,030.80 in March.
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