Capital Gold Group Gold News: April 2008 Archives
By Polya Lesova
NEW YORK (MarketWatch) -- Gold futures gained in electronic trading Wednesday after the Federal Reserve cut its fed funds rate by 25 basis points to 2%, meeting Wall Street's expectations. Gold for June delivery was last up $6.40 at $871.50 an ounce on the New York Mercantile Exchange. The rate cut brought the Fed's target for overnight interest rates to the lowest level since December 2004. The FOMC emphasized higher inflationary pressures and downplayed risks to growth, a signal that the committee may leave rates steady at the next meeting. Before the announcement, gold futures finished regular trading at $865.10, down $11.70.
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Interest in Metals Picks Up as Hedge Against Inflation
Wall Street Journal
By ALLEN SYKORA
April 25, 2008
Demand for precious metals in self-directed Individual Retirement Accounts is growing for many of the reasons other investors have been drawn to the metal -- a hedge against inflation, dollar weakness and credit-market worries.
Purchases of gold and other metals for IRAs make up a minute portion of overall investment demand, and observers said many investors don't realize they can use gold for IRAs. Nevertheless, there has been a significant pickup in gold IRAs over the past half year.
"Even though it was available, it was not very well promoted by anyone," said David Morgan, an independent precious-metals analyst. "It's rather cumbersome for bullion dealers to set it up."
But with the credit crisis, investors are looking for ways to buy gold, and retirement accounts make it possible to do so with funds they already have, he continued.
George Cooper has been handling gold IRAs for 17 years. Back in the mid-1990s, he said he might get one such call every month or two. Now he said he gets up to 50 inquires daily.
Interest in IRAs using precious metals began picking up around 2000, as the ratio of the Dow Jones Industrial Average versus gold hit a record, Mr. Cooper said. Interest further picked up after the Sept. 11 attacks.
The combination of gold hitting $1,000 an ounce (it has since
pulled back to $886.80 in
Hugh Bromma, chief executive of Entrust, said investment in metals IRAs is "small but growing." He said metals inquires are now five to 10 times greater than a year ago.
All of the precious metals -- gold, silver, platinum and palladium -- can be purchased for IRAs. However, Mr. Bromma said, probably 90% of the interest is in gold.
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BANGALORE: This price rise has raised no heckles, on the contrary the market is as glittering as ever with both buyers and sellers scrambling to make maximum out of the prevailing situation.
Yes, we are talking about the bullion market where gold prices have zoomed by about 35 per cent in a short span of five months. But such a sharp jump in prices astonishingly has not had any dent in physical buying of the metal.
Jewelers say the age-old notion of high prices deterring sales have been proven wrong in the case of gold. They said high prices are attracting even more buyers as they see gold as the safest investment options with attractive returns.
"In fact, whenever there is volatility, sales go up. The sales being inversely proportional to the price is very old phenomenon, which does not hold good today," Bangalore Jewellers' Association President Mahesh Pati told PTI.
With returns being assured, gold in increasingly seen as the safest bet and its traditional role as ornaments is a bonus.
"With globalization and IT revolution, people have deep pockets and they are spending on gold not just for adornment but as an investment also," Pati said.
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April 23, 2008 by Corey Rosenbloom
Intermarket analysis is a fascinating branch of market research, and I wanted to show you the performance of gold and the US Stock Market.
There’s been an inverse relationship, such that when gold rises, the market is generally falling and vice versa.
Gold is traditionally seen as a hedge against inflation, and inflation typically is seen as being negative for the stock market.
Also, in uncertain economic times (especially with a falling US Dollar), gold is a more attractive investment than US Stocks and so the two asset classes, much like stocks and bonds, compete for your investment capital.
This correlation holds on the longer time frame charts as well:
Notice that gold prices in 2006 around $600 were not a problem for the stock market. As signs of recession began to emerge, and investors began to be ’spooked’ by deteriorating financial conditions, larger investors likely began rotating out of the US Stock Market and into other markets such as gold, bonds, etc.
We see the rotation accelerate as the stock market began to fall going into 2008, when the price of gold ’skyrocketed’ from just under $700 per ounce to over $1,000 per ounce in March 2008. The S&P fell from a peak of 1,575 to just above 1,250 during the same period.
The recent fall of gold prices has contributed – with other factors – to a rise in the current stock market since March.
While there may be some correlation between gold prices and the US Stock Market, gold prices are much more inversely correlated with the US Dollar Index.
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April 23, 2008 by Corey Rosenbloom
Let’s look at two markets with a powerful negative correlation: The US Dollar Index and the Gold Market.
Gold traditionally is a hedge against inflation, and inflation often is correlated with a weak dollar and higher commodity prices across the board (which is the environment we see now).
As the dollar declines, commodity prices (including gold) often rally, linking the inverse relationship. Let’s zoom down from a monthly chart down to the daily chart:
Notice the shift that occurred at the ‘turn of the century’ where gold prices were at their lowest levels of the last decade and the US Dollar Index (along with the Stock Market) was making new highs. The market shifted in 2001 (as the recession began) and the price of gold (per ounce) has never looked back.
The US Dollar, on the other hand, is another story. The Dollar index peaked at 120 and is now 41% lower than it was at its peak. Gold, on the other hand, rose from $250 (per ounce) to a peak above $1,000 an ounce, rising 400% in the same 8 year period.
This also means that the value of a US dollar is worth much less in terms of gold prices than it was in 2,000. In 2000, if you were offered $1,000 in gold that you stored away, if you cashed in today, you would get back $4,000 (if converted into dollars). Of course, those dollars are worth less today than they were then, so it may be better to keep the investment in gold! But that is for another lesson.
Let’s keep our focus on these two markets for the meantime.
Weekly charts show the same strong inverse relationship:
Again, the picture is the same. Since early 2007, gold prices have almost doubled while the US Dollar Index fell 20 points (weakening against other currencies).
If the US Dollar Index reverses trend, then expect gold’s trend to pause or reverse as well. Until that happens, the current trend remains in force.
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Tired of the wild fluctuations of gold price in the London Bullion Market and its impact on Indian market, Bombay Bullion Association (BBA), in collaboration with Bombay Stock Exchange (BSE), National Multi-Commodity Exchange (NMCE), IT People (India) and Reliance Money, has decided to set up its own trading platform for gold.
Though the representatives of the respective partners of the proposed joint venture (JV) denied that the decision had, "anything to do with the recent pole-vaulting of gold price", they agreed with the fact that "it's time we moved from price taker to price maker".
Asked whether the yet-to-be formed limited company has obtained the requisite permission from the authorities including the Reserve Bank of India (RBI), director and CEO of Reliance Money Sudip Bandyopadhyay said here yesterday, "We have not approached them so far but we will be intimating the authorities for necessary clearances. After all, we want to launch it in a month's time."
Talking about the trading platform, he said the Bullion Spot Market (BSM) will be an over the counter bullion trading platform which would "help jewelers not only in monitoring the international bullion price fluctuations on real time basis, but will also facilitate retail investors in the purchase of gold coins and bars". Price fluctuation is a thorny issue for the gold traders. Though India is a leading consumer of gold, a "total helplessness" has gripped the traders in controlling the prices, he added.
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As the subprime credit crisis issue further aggravates, the international financial markets reached into a further bleak period. The current financial turmoil period has made gold a Safe Haven.
The US economy is in a downturn period with the dollar depreciating further. Interest rates which have also declined further. Despite all relief measures the economic data has been weak. The silver and palladium volatilities jumped to 70 percent in late March, and the S&P 500 index volatility rose to 29 percent. More than a quarter of a million people lost their jobs in the US during the first quarter. Retail sales in the US declined by 0.6 percent month-over-month in February, as households spent less money on items such as cars and eating out.
All the above have made gold the safest investment and this resulted in the prices of gold reaching a new record of $1011/0z (on the London PM fix) on March 17, 2008. Investors bought 72 tonnes of gold in exchange-traded funds in Q1 FY 08, taking total holdings to 943 tonnes ($28 billion) at the end of March. Gold price volatility rose to a quarterly peak of 28 percent on March 20; however, equities and other commodities volatile spiked even higher during the quarter. Gold – and commodities in general – continue to outperform bond and equity markets throughout the Q1 FY 08.
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photo. Figures from the World Gold Council showed sales of gold jewelry in China hit
a record high of 302.2 tons in 2007, up 34 percent on the previous year.
(Bloomberg News)
BEIJING -- Li Zhixin spent weeks planning his one-day family tour of Beijing's historic sites, but instead found himself in one of the city's shopping malls, watching his wife happily trying on gold necklaces.
"I can't complain -- we just like gold," said the 30-year-old steel plant worker from Tangshan, an industrial city southeast of Beijing.
"Gold is a better store of wealth than platinum," he added, as his mother-in-law counted a wad of cash beside him. "Of course, diamonds are lovely. But we can't afford the big ones and are not interested in small stones."
They finally bought a pendant necklace for more than 3,000 yuan (US$439), more than two months' income for an average Chinese urban resident.
With per-capita disposable income in cities up 17.2 percent to 13,786 yuan in 2007, gold jewelry is no longer beyond the reach of masses of Chinese consumers on the lookout for something luxurious.
"People buy gold jewelry for anniversaries, weddings, or as gifts for holidays," said Daisy Yan, a saleswoman at the Xin Dong An Department Store in downtown Beijing.
"First it's a pretty adornment, also I think it's maybe about vanity, a way to show how rich the wearer is."
Figures from the World Gold Council showed sales of gold jewelry in China hit a record high of 302.2 tons in 2007, up 34 percent on the previous year.
China has now overtaken the United States to become the world's second largest buyer of gold jewelry after India.
But behind the remarkable growth lies a deep Chinese traditional appreciation of the precious metal as a hedge against social and economic risks.
"I'm more confident in gold -- we've been buying it for so many years in the past anyway," said 78-year-old Wu Peifen, who was selecting a wedding gift for her grandson at Beijing's Wangfujing Department Store.
High inflation and a 41-percent slump in the domestic stock market this year have added further momentum to China's drive to buy gold.
"The stock market is not as good as before, and people do not feel safe parking all their savings in banks," said Lin Yuhui, an analyst with the China International Futures in the southern city of Shenzhen.
"So they tend to buy gold as a means to hedge inflationary risks."
Spurred by strong demand and international price rises, one gram (0.035 ounces) of pure gold jewelry sold at a new high of 242 yuan in Beijing in March, up nine percent in just two months, earlier state media reports said.
On the London Bullion Market, the price of gold rose to US$944.13 per ounce Friday, up more than 37 percent from a year ago.
But Chinese consumers are not deterred by rising prices, experts said. Rather, they increasingly view gold as not only a means to protect wealth but also as an efficient part of their investment portfolio.
"In fact, higher gold prices helped to stimulate investment purchases of the metal... as consumers were attracted by the strong returns generated by the metal," the World Gold Council said in a recent report about the China market.
It said investment demand for gold at the retail level amounted to 23.9 tons in 2007, a rise of 60 percent compared with 2006.
However, for young Chinese, fashion appears to be more important than potential return.
"What I want is something fashionable and special," said Zhang Xiangyu, a 25-year-old beauty parlor worker, as she browsed gold earrings and bracelets in a jewelry store with her boyfriend.
"I won't waste time thinking too much -- I'll buy it as long as I like the look of it."
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Last update: 11:41 a.m. EDT April 16, 2008
NEW YORK (MarketWatch) -- Gold futures rallied Wednesday, propelled by sharp weakness in the U.S. dollar, which fell to a new low against the euro.
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NEW YORK (MarketWatch) -- Gold futures rose Monday, as weakness in the U.S. dollar boosted demand for the precious metal.
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Capital Gold Group Report : "Gold prices may scale new high in early 2009" - The Hindu Business Line
K.R. Srivats
New Delhi, April 10, 2008
The ongoing secular bull market for gold would sustain itself for at least three more years and the yellow metal would probably make a new high as one enters 2009, according to Mr Joseph M Foster, Portfolio Manager, Van Eck International, New York.
Stating that financial uncertainty and stressed credit markets were driving gold prices, Mr Foster, who manages AIG PB Equity Fund Gold and other gold funds, told Business Line here that the gold market was currently going through a consolidation phase.
Gold price hit a high of $1,030 an ounce in mid-March this year. “Once this phase of consolidation runs its course, more investors will come back to gold and will see it move higher as we approach the year-end and probably make a new high as we move into 2009. In the longer term, all the fundamentals are in place for this bull market to sustain itself for at least another three years in my view. You look at the stress in the credit markets, supply demand picture for gold, it is all very positive for the gold environment,” he said.
Mr Foster was here on the occasion of the launch of AIG’s World Gold Fund, which is an open ended fund of a funds scheme that would invest predominantly invest in units of AIG PB Equity Fund Gold. The AIG PB Equity Fund Gold invests worldwide in stocks issued by companies engaged primarily in the extraction, processing and marketing of gold.
Meanwhile, on whether he expects the International Monetary Fund’s plan to sell 400 tonnes of gold to affect the market, Mr Foster said that any such move would not have much impact at all. “First of all we are not sure they (IMF) are going to make the sale, as it has to be approved by the US Congress. In the past every time IMF has proposed to make the sale, Congress has voted it down. That remains to be seen. If they do make the sale, that would be done under the auspices of central bank gold agreement. The UMF is part of the agreement. European central banks are selling gold under this agreement. The members to the agreement (including IMF) cannot cumulatively sell more than 500 tonnes a year. “So IMF’s plan is already pretty much priced in the market. It would not have much impact at all,” he said.
He also highlighted that the easy monetary policy stance adopted by most central banks, including the US Federal Reserve, was a positive move for gold as more liquidity is pumped into the financial system.
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by Thomas Tan, CFAApril-10-2008
Even we are now in the middle of a correction of a great bull run on gold, I expect this consolidation will take less time to finish than the last correction between mid-2006 to last August.
By the time it is done, we should see gold decisively breaking the $1,000 level at both weekly and monthly charts. Meanwhile, I would like to discuss the new demand driving gold this time which is different than 1970s.
Most of the people refer the current gold bull market as the repeat of 1970s. This is true, especially there are many similarities of price movement between the two. For commodities, at the end of the day, it is demand and supply which drives the prices. I see the demand for gold is more robust now than 1970s. In 1970s, before abandoning the gold standard, gold had been fixed at $35. Once this cap was lifted, we saw gold exploded to over $200 in 3 years. Then there was a severe correction bringing gold back to around $100. After 2 years of correction, similar to mid-2006 to last August, gold again took off in a spectacular run, from $100 all the way to over $800 in 3 years. At the peak of this bull market, people were waiting in line outside the banks to purchase gold. However, in 1970s, the participants were mainly people living in the west hemisphere, particularly in the US, Canada and Europe, with some limited participation from a few other Asian financial centers such as Hong Kong, Japan, Singapore and Taiwan.
This time, I see the participants have been much wider and broader geographically, because the financial market is a lot larger, more global and liquid today than 1970s. It includes the so-called BRIC regions such as Asia (China and India), Eastern Europe (Russia), Latin America, and don't forget about the oil rich Middle East. This should not be a big surprise since these countries such as China have already been the driving force beyond the current boom of many commodities, just look at what has happened to oil, steel, copper, coal, agricultural products, to name a few.
From demand standpoint, the situation of heavy debt consumers in the US may not have as much spare money as 1970s to buy gold this time, however I expect this reduction in demand on individual basis will be more than offset by our now larger population and larger capital base than 1970s. If US dollar falls fast against other foreign currencies, coupled with higher inflation, people in the US will feel a strong need to diversify from paper assets in their nest eggs. They will dump stocks and bonds to purchase gold for protection and safehaven reasons, since commodities, especially gold, will provide better hedge than stocks and bonds in a inflationary environment with falling currency.
There have been some newspaper articles discussing the lost decade by comparing current credit crisis with either 1970s in US or last decade in Japan. There are some differences. US family was actually a lot more affluent then than now. In the 1970s, a single income from a family of 4 could live very comfortably and afford a higher living standard than today. People were not as leveraged, and housing, credit card, auto loan were not an issue at that time. People had a much higher saving rate, more discretionary spending. Interest coverage ratio per average family was much higher, so was the payback ability. Same thing can't be said today. In that sense, it can be argued the current credit turmoil is more painful and difficult than 1970s.
Same thing for Japan in the 1990s. Even more and more Japanese got into the negative housing equity problem due to falling real estate price, as we are facing today, Japanese were never as heavy in debt as us, neither their government. What they chose to do was to use the incomes (both household and banks) to write off the bad loans, year by year slowly and gradually. This is why recession in Japan had prolonged for over a decade, mainly reflecting an inefficient financial system by their government not allowing commercial banks to fail. But this process, even it is long, is less painful short term, as far as there is still net income in the family and net profit for banks.
US will not take the same route as Japan, so I expect the process here will be a lot faster but more painful. Living standard will be lower, assets, especially houses, will lose more value, general equity and bond market will suffer further losses, and inflation will be a lot higher in double digits, at the end of this process. At the same time, I am very pessimistic on the greenback, and see US dollar falling much further in next several years, at least another 25% before we run through the whole process.
This process itself would fuel gold and silver to new all-time highs well into 4 digits. Meanwhile, I see new players not in 1970s mentioned above will drive gold even higher. After many years of gold bear market, in general, investment level in gold is still at a very low level. Let us just look at China. After many years of government controlled market and ration, Chinese citizens have minimum personal assets until recently, let alone gold. This is why you see that China's private and public sectors are already gearing up for increased business in gold trade.
The China Banking Regulatory Commission (CBRC) just issued permits allowing Chinese commercial banks to trade gold futures on the Shanghai Futures Exchange (SHFE). Commercial banks are required to be members of the Shanghai Gold Exchange (SGE), China's sole spot gold trading platform, and the SHFE, before conducting gold futures trading through the SHFE. Chinese commercial banks are spot gold trade dealers, and some of them are granted gold import and export qualification enabling them participate in the global spot gold trade. All these changes are driven by gold demand from both individual investors and institutions. Due to long tradition of using gold as currency, and modern history of several hyperinflation periods and government changes, Chinese have a strong trust in gold, but not any other paper currencies or assets. The current sluggish stock market probably triggers some rush to invest in the yellow metal. When prices hit a record of $1,030 an ounce recently, people rushed out to buy $300M worth of gold alone in one day. The roughly 10% drop recently does not seem to have dampened enthusiasm among Chinese investors, because they believe there is still lots of rooms for further gains. Meanwhile, many investors are also buying paper gold, a relative new form of gold investment. Figures from the Shanghai branch of the Central Bank show that trade in paper gold products has surged dramatically since the start of the year.
A commonly purchased unit of physical or paper gold in China is one small gold bar, 5 tael, or roughly 6 oz. here. Just do a simple but conservative calculation, 2% of 1 billion people own a single gold bar, it translates to 120 million oz of gold. I think it is a conservative estimate, the ultimate demand in the future including paper gold can be several folds higher cumulatively. Keep in mind that the whole world produces only about 75 million oz gold per year.
Moreover, there is evidence and news China's Central Bank is methodically diversifying its foreign reserves out of the US dollar into other and hard currencies which will include gold, as one of the ways to diversify away from dollar-denominated assets. This kind of activities have been reported by other central banks as well. According to the latest report, China's foreign exchange reserves rose by $118.9B in the first two months of the year to $1.65 trillion. Even a 5% conversion into gold will turn into about 85 million oz of gold, again more than a year's production by the whole world. A 5% in gold is relative small by central bank standard. In 1970s, Central Bank of Taiwan had actually almost all their foreign reserves in gold.
I even see the day when international gold will be quoted in Renminbi along with US dollar and Euro, due to trading activities. China's exponentially growing gold demand alone will influence the gold price dramatically, not talking about other regions. Don't get scared by the current correction on gold. It is a typical and healthy correction before gold assumes its run again.
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April 10, 2008South African gold production has dropped 28.2 percent in the year from February last year, official data released on Thursday showed.
Gold production after seasonal adjustment fell 11.1 percent in the three months to end February, with February recording a decrease of 7.7 percent alone.
Statistics South Africa's data shows that gold's continuing production decline helped pull overall mining output lower.
Actual total mining production for February 2008 decreased by 7.3 percent compared with February 2007, and after seasonal adjustment, total mining production for the three months from December 2007 to February 2008 decreased by 5.2 percent compared with the previous three months.
Non-gold minerals production also dropped 4.1 percent during the three-month period, but recorded a fall of only 3.2 percent year-on-year.
"The major contributors to the decrease of 5.2 percent were the production of platinum group metals (PGMs) (-2.3 percentage points), gold (-1.5 percentage points) and diamonds (-1.5 percentage points)," said Statistics South Africa.
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Gold gains 1.4 percent as dollar slips, oil jumps
By Atul Prakash
Wed 9 Apr 2008, 14:26 GMT
LONDON (Reuters) - Gold firmed more than 1 percent on Wednesday as the dollar slipped on growing expectations of further aggressive rate cuts by the U.S. Federal Reserve and oil prices jumped, analysts said.
Spot gold rose to a session high of $925.40 an ounce after falling to a low of $902.80. It was at $924.00/924.90 at 1448 GMT, against $913.10/913.90 in New York late on Tuesday.
"The metal continues to look to oil and dollar movements for short term direction," said Suki Cooper, precious metals analyst at Barclays Capital.
"The overall environment remains positive for gold, given a raft of supportive external factors ranging from dollar weakness, anticipation of further Fed rate cuts as well inflationary concerns."
The dollar fell against the euro and the yen on views the Fed could cut rates by a substantial 50 basis points this month amid worries of a possibly severe U.S. economic downturn.
A weaker dollar makes dollar-denominated metals cheaper for holders of other currencies, but a slight recovery in recent days has made gold bulls wary of adding to their holdings. The metal is also traditionally seen as a hedge against inflation.
Oil jumped to more than $111 a barrel, within sight of a record high, after a U.S. government report showed a surprise drop in inventories in the world's top fuel consumer.
Precious metals consultancy GFMS Ltd. said gold prices were likely to bounce back above $1,100 an ounce this year after bottoming out in the high $800s.
It said in a widely-tracked market report, Gold Survey 2008, that the factors supporting prices over the last few months would remain in place and investors would continue to look at bullion for strong returns.
Traders said volumes were low as the market looked ahead to central bank and Group of Seven meetings this week, which could offer clues to the future direction of currencies and bullion.
"The Group of Seven meeting on Friday has a lot to do with the dollar. The big risk is that if they come out with some major rescue plan for the banking system, gold will fall quite sharply," said Matthew Turner, analyst at Virtual Metals.
CENTRAL BANKS
The market also looked at central banks for near-term direction. The European Central Bank is expected to keep interest rates on hold, but the Bank of England could cut its key rate on Thursday.
A rate cut by European central banks tends to help the dollar and is seen as negative for gold.
Some analysts said the market was expected to consolidate its position before marching higher again.
Gold hit a record high of $1,030.80 an ounce on March 17 before falling to a two-month low of $872.90 last week in a broad commodities sell-off.
RBC Capital Markets said in a market report that investors should take profits ahead of the end of a Fed rate cutting cycle.
"Gold is poised for a consolidation at lower levels before making another run at $1,000/oz later in 2008."
Plans by the International Monetary Fund to sell some gold from its reserves capped near term gains, but analysts said the market would absorb the sales, which are expected to take place in a controlled manner.
The IMF is the world's third-largest gold holder after the United States and Germany, with 3,217.3 tonnes in reserves. It plans to sell 403.3 tonnes and use the profits to invest in government and corporate bonds, and possibly equities.
Spot platinum fell to $1,995/2,005 an ounce from $2,008/2,018 late in New York. Silver was at $17.16/18.21 an ounce, up from $17.64/17.69, while palladium rose $1 to $450/458 an ounce.
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By Lewa Pardomuan
SINGAPORE, April 8 (Reuters) - Gold held steady near a one-week high on Tuesday after the dollar's fall against the euro ignited buying by speculators, helping the metal defy news that the International Monetary Fund plans to sell some of its gold.
The IMF is the world's third-largest gold holder with 3,217.3 tonnes, but any price dip on its sales would probably be met by buying by jewellers and investors, said dealers.
Gold hit a high of $925.50 an ounce before trading at $922.40/923.30 as of 0841 GMT, little changed from $923.70/924.50 late in New York on Monday.
Gold jumped to a one-week high at $929.10 an ounce on Monday on surging oil -- still well below a record of $1,030.80 hit on March 17.
"Even though the IMF sells gold, I don't think it will have much impact," said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.
"They will do it bit by bit. If they say they have to sell 400 tonnes in one day or one week, there will be a bit of trouble."
Member countries must still approve the plan to sell 403.3
tonnes of the fund's stocks, and the U.S. Congress will also need
to give the go ahead before any gold sales can begin.
Dealers expected gold to trade in a range with tough resistance seen around $950 an ounce.
"If it stabilizes around $950, we can see a further rise to $1,000," said Leung of Lee Cheong Gold Dealers, who pegged support around $915.
The euro rose more than a cent from the day's lows
against the dollar, with the U.S. currency pressured by worries
about a recession and the prospect of further interest cuts by
the Federal Reserve.
Lower interest rates also boost gold's appeal as an alternative investment.
"There's still a potential for gold to try $940 today or tomorrow," said a dealer in Singapore. "Chartwise, the bearish signals remain but sentiment may change if gold is able to close higher on Friday."
A Tokyo trader said increasing chances that the U.S. financial sector is calming down from recent credit woes could provide a floor for long-term bond yields, making equities and gold relatively attractive assets to invest in.
"When interest rates fell, investors bought commodities in general as a hedge against inflation. But if inflation becomes less of a market concern, gold may be preferred to other commodities due to its own fundamentals," said Hitoshi Inagawa, a senior manager at Japanese commodity brokerage Yutaka Shoji Co.
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12:27 PM EDT April 7, 2008by Polya Lesova, MarketWatch
NEW YORK (MarketWatch) -- Gold futures rallied along with other commodities Monday, as worries about the health of the U.S. economy drove investment demand for the precious metal.
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Carolyn Cui and James Areddy | April 02, 2008
GOLD-BUG fever is spreading.
From China to the Middle East, new ways to invest in gold are rapidly popping up in developing countries.
It's transforming the market for one of mankind's most venerable ways to sock away wealth.
The door is opening to a new class of investors who previously wouldn't have had access to gold futures and other tools.
Their rush to invest has helped fuel soaring prices - gold crossed $US900 an ounce for a time in the past week, and there are some calls for $US1000 - while adding volatile new dynamics to the market.
On January 9, thousands of Chinese investors jumped into the bullion market when the country's first gold futures contract were launched. Futures are agreements to buy or sell something at an agreed upon price in the future, and are traditionally the domain of the pros, not individuals.
So far, it's been a bumpy road: the most active June contract soared 6.3 per cent on its debut day, then tumbled 3.7 per cent on day two.
A slew of other new investments like these are planned in markets from Dubai to Mumbai.
In India, the top lender, State Bank of India, plans this year to launch an exchange traded fund that focuses on gold - enabling investors to trade gold much like a regular stock.
The World Gold Council, a London-based gold-mining industry group, says it is seeking to roll out its first gold ETF in Dubai this year, pending regulatory approval.
Last August, the Osaka Securities Exchange in Japan rolled out a gold-linked bond aimed at smaller investors.
In one of the largest recent scandals, a Shanghai trading firm, Liantai Gold Products, managed to find a way to trade gold futures contracts overseas - circumventing Chinese law - only to lose millions of dollars of its clients' money in the process.
Liantai's total trading volume once reached a remarkable 11.9 billion yuan ($1.86 billion), according to court documents.
The case is pending.
Until recently, most buying and selling of gold in China required lugging the metal between brokers and haggling over prices.
As recently as a decade or so ago, when Chinese tourists were first permitted to travel to Hong Kong in significant numbers, they often descended first on gold shops in the former British colony to stock up.
Only in 2002 did investors in China get the ability to trade physical gold on the Shanghai Gold Exchange, though individuals couldn't invest in actual bullion until 2005.
Even then, the opening was limited.
Today, however, some of the new products emerging in China and elsewhere can be traded over the internet like stocks.
The Shanghai Futures Exchange has warned that the product is primarily meant for big trading firms or gold consumers and producers, such as the nation's expanding gold-mining and electronics industries.
Yuan Lianbo, who heads the gold trading desk at Shandong Gold Group, one of the country's biggest gold miners, says his company has already started trading the Shanghai futures contract to hedge its price risks.
Just before trading began, the exchange tried to limit speculation by individuals by more than tripling the size of a single futures contract to one kilogram of gold from 300 grams.
It also increased the amount of margin, or collateral, that investors must post, to 9 per cent from 7 per cent of the value of the contract.
Still, while those moves lifted the minimum investment to about $US2700, analysts say gold futures are still affordable to many Chinese investors.
Among those clients signing up to trade the gold contract through brokerage China International Futures, "about 90 per cent are individual investors, most of whom were moving assets from stocks after turning bearish on the stock markets", says Lei Hongjun, deputy manager of the firm's Ningbo branch. China's stock market shot up 97 per cent in 2007, but recently has tumbled 13 per cent from its peak in October.
Of course, the new ability to trade gold in China won't automatically result in higher prices, analysts say.
But the new contract's movement will give the rest of the world a better idea of China's appetite for gold, which will be a key factor for gold prices.
Since 2003, Western investors have poured billions of dollars into a related investment, the gold exchange-traded fund.
Gold ETFs are pegged to the price of gold, but trade like stocks.
The most active gold ETF, a Big Board-listed fund called Street Tracks Gold Shares, now holds more of the precious metal than the European Central Bank or China's central bank. (ETF shares typically represent a chunk of physical gold.)
Similar funds have been launched in Australia, Britian, the US, South Africa, Mexico, Singapore and various European countries.
Gold, often in the form of jewellery, holds a special place in many Asian and Middle Eastern investors' portfolios.
Increased wealth in these regions means more people can afford to buy on impulse.
Chinese officials have suggested their country's growing demand for commodities is a reason that its three commodity futures exchanges should play a greater role in global pricing.
Sun Zhaoxue, chairman of China Gold Association, is quoted on the Shanghai Futures Exchange's website as saying the new gold contract will "improve China's influence on the global metals market and pave the way for China to set the prices in the market".
Already, a copper-cathode contract traded at the Shanghai Futures Exchange since 1999 rivals the importance of the main copper benchmark on the 130-year-old London Metal Exchange.
However, commodity benchmarks are tough to create from scratch.
The Wall Street Journal
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