Kipp, Check this out. Japan investors are likely to buy more gold on yen strength.
U.S. gold inches up early; bullion ETF sets record
Tue Aug 21, 2007 10:33AM EDT
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NEW YORK, Aug 21 (Reuters) - U.S. gold futures inched up
early on Tuesday as financial markets returned to normalcy for
the moment, and as most bullion market players were on the
sidelines focusing on the global credit condition.
Despite gold's volatile price swings last week, bullion
held by gold exchange-traded funds (ETFs) hit another record
high, helped by investors who bought and held the funds for
long-term diversification purpose, analysts said.
"Right now we continue to see calm conditions that we saw
yesterday. I don't think anyone is really looking to
particularly trade. It's more about concerns that
liquidity-raising issues are showing up again," said Paul
McLeod, vice president of precious metals of Commerzbank in New
York.
At 10:15 a.m. (1415 GMT), most-active gold for December
delivery (GCZ7: Quote, Profile, Research) on the COMEX division of the New York
Mercantile Exchange was up 50 cents at $667 an ounce, trading
between $664.60 and $669.80.
McLeod said that the precious metal market was currently
not moving on its own fundamental factors but driven in
response to developments in other markets.
"I think most people are on the sidelines unless they are
forced to come to the market, in which case activity out there
will be driving the selling," he said.
Bullion used to back gold ETFs continued to grow, ignoring
market volatility because of liquidity fears. Data showed that
gold held by StreetTRACKS Gold Shares (GLD.N: Quote, Profile, Research), the world's
largest bullion ETF by far, surged to a record level at 514.21
tonnes as of Monday, compared with about 507 tonnes on Friday.
(XAUEXT-NYS-TT: Quote, Profile, Research)
Dealers said that investors tended to buy gold ETFs to
diversify their assets, and that ETF investors tended to hold
on to the funds because gold was used as an alternative
investment to balance their portfolios against volatility in
other financial markets.
Last week, December gold futures plunged as much as $30, as
funds and investors liquidated bullion to raise liquidity and
to cover losses outside of the commodity sector as stock
markets tumbled on a global credit squeeze.
Stephen Briggs, metals analyst of Societe Generale in
London, said in a client note that both long-term investors and
short-term traders were now buyers of bullion ETFs.
"The recent falls in price, as professionals have
liquidated gold in order to raise liquidity, have again spurred
fresh 'bread and butter' demand, but sentiment in the
professional market is cautious," Briggs said.
In official gold sales, the European Central Bank said on
Tuesday that gold and gold receivables held by euro zone
central banks fell by 26 million euros to 172.041 billion euros
in the week ending Aug. 17.
Gold holdings fell because of sales by one euro zone
central bank, and this was consistent with the 2004 Central
Bank Gold Agreement, the ECB said.
In other news, large funds, Japanese retail investors and
small institutions alike are fleeing the market for
yen-denominated gold and other metals after sharp volatility in
the yen and a sell-off in Tokyo shares last week.
Open interest, or the number of outstanding contracts, in
Tokyo Commodity Exchange (TOCOM) gold futures fell to the
lowest almost six years by Monday as uncertainty over a credit
squeeze hurt investor confidence. [ID:nT237168]
Spot gold <XAU=> was quoted at $657.10/657.70 an ounce,
compared with $657.60/658.20 late Monday. The London morning
gold fix was $655.50.
COMEX September silver (SIU7: Quote, Profile, Research) was down 9.0 cents at $11.645
an ounce, dealing between $11.555 and $11.840.
Spot silver <XAG=> was quoted at $11.63/11.67 an ounce,
compared with $11.73/11.76 late Monday. London silver was fixed
at $11.67.
South Africa's National Union of Mineworkers (NUM) said on
Tuesday that 26,000 of its members at Lonmin Platinum (LONJ.J: Quote, Profile, Research)
mines have gone on strike.
A spokesman of the union told Reuters that the workers went
on strike on Sunday night in protest against a new payment
system implemented by the company that he said was cheating
workers.
Despite the news, NYMEX October platinum (PLV7: Quote, Profile, Research) was down
$3.40 to $1,244 an ounce. Spot platinum <XPT=> fetched
$1,241/1,245 an ounce.
September palladium (PAU7: Quote, Profile, Research) was down $4.80, or 1.5 percent,
at $327.15 an ounce. Spot palladium <XPD=> was quoted at
$325/328 an ounce.
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