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Gold Is Going Crazy. Update.
Gold hit a new long term record for the seventh consecutive session on Friday as Japanese private investors were once again prominent buyers and any dips in the price have provided investors with fresh impetus to buy bullion and therefore underpin prices.
Gold hit a high of $525.25 a troy ounce in European trade, up more than $5 on the late quote in New York on Thursday. A strong intra-day gain that underlines the recent acceleration in the gold price, which has risen more than 6 per cent so far this month, which is more than the amount it rose for the whole of November.
The bullion price rose by more than 7 per cent between September and October, having spent the first eight months of the year relatively flat. The next target for gold is breaking the March 1981 high of $540.50.
“The activity in the bullion market remains very impressive, with aggressive buying of any dips and a dearth of selling in the rallies helping to create a bullish chart pattern of higher lows, and higher highs, thereby attracting more momentum-based fund buying,” said Alan Williamson, metals analyst at HSBC.
Mr Williamson said both London and New York have lagged the rally in Tokyo, which has been the real driver behind the most recent surge higher in prices, with the Tokyo Commodity Exchange closing limit up on the day.
He said the Tocom October contract closed up the daily limit of ¥50/g at ¥2,105/g ($542/oz), the highest close for the benchmark contract since March 1990.
Tocom trading rules do not allow daily price movements of ¥50/g above or below the previous day’s close. “Although Tocom data is opaque at best, some estimates have put open interest in the market at 501,000 lots, up around 67 per cent from about 300,000 lots in early October,” Mr Williamson said.
He said Tocom’s market management committee met to discuss the possibility of intervening in the precious metals market, but concluded that no measure was needed at this stage. Nevertheless, the exchange will continue to monitor market activity.
Mr Williamson said there are a number of reasons for the surge in demand, not least the continued weakness in the Yen which has fallen by more than 10 per cent since the beginning of September to current levels of ¥120 against the dollar.
“In turn this has helped create a virtuous circle in the gold market of rising (dollar-denominated) prices, local currency weakness, increased retail demand (in Japan), higher (dollar denominated) prices, more fund buying etc, etc,” he said.
Gold has remained above the $500 level for the past seven sessions, and is on track to exceed the 10 day period it remained above this level in 1983. The last time it was trading at $525 was when it was sliding from the all time record of $850 in January 1980. During this period gold remained above $500 for a period of 13 months.
The price of gold bullion has been rising since 1999, marking its longest upward run since it was freely floated in 1968.
Silver rose to a fresh 18 year high of $8.99 a troy ounce.
New York Trading still going on.
