Physical Gold Demand "Amazing" in 2009 as US Job Losses Leap, Ailing Banks Drag Euro Lower
Spot Gold prices bounced in a $10 range early in London on Friday, trading just shy of $860 an ounce as new US data confirmed a six-decade record in US job losses.
World equities slipped while the US Dollar rallied on the currency market. Crude oil headed for a near-record 11% week-on-week drop.
The US jobless rate rose to 7.2% of the workforce in Dec., the Bureau for Labor Studies announced as Wall Street headed for a sharp drop at the opening.
"All up the technical picture for Gold is [also] pointing to the downside near-term," reckons Phil Smith in his latest analysis for Reuters India, "but there is big support at the $835 level.
"That's the peak gold hit in 1980 on a combination of high inflation linked to oil prices, the Soviet invasion of Afghanistan, and the impact of the Iranian revolution."
Friday morning saw the Gold Price in Sterling – down almost 9% from Monday's new all-time record highs – trade at £560 an ounce, almost twice the peak of Jan. 1980.
The Gold Price in Euros stood at €627, some 15% below its record peak of 29 years ago (Deutsche Mark equivalent).
Over on the forex market today, the single currency headed for its worst-ever week vs. the British Pound – despite the new all-time low in official UK interest rates – with RBC Capital Markets in Toronto calling it lower still ahead of Europe's interest-rate decision next Thursday.
BNP Paribas said it sees the Euro also sliding against the Dollar if Germany is forced to create a publicly-owned "bad bank" to buy toxic assets from the country's ailing finance houses.
Commerzbank today accepted a €10 billion capital injection from the federal government – giving the state a 25% stake in Germany's No.2 bank – after the acquisition of Dresdner Bank threatened its balance-sheet.
"The final quarter of 2008 may have been worse than we expected," said Bundesbank president Axel Weber of the German economy in Cologne late on Thursday.
"This would weigh on our growth projections for the current year."
Looking further ahead for Gold in 2009, "People are genuinely worried about what the world is going to look like [this year]," says Gary Dugan, chief investment officer at US giant Merrill Lynch – the former investment bank rescued in a $50 billion takeover by Bank of America last Sept.
"It is amazing how many clients want physical Gold Bullion, not ETFs," Dugan is quoted by The Daily Telegraph.
Today's technical analysis from the Mitsui precious-metals team in London pegs support at $830 with resistance at Thursday's top of $865.
Gold "has gravitated back to the 100-day moving average at $853, with a relatively quiet start to the day," it adds.
For the near-term, "Currency market volatility should continue to take precedence in precious metals," says today's note from Standard Bank.
"This could see most risk-averse precious metals investors opting to remain on the sidelines."
