By Adrian Ash
WHOLESALE LONDON prices to buy gold rose 1.3% Thursday morning in London, briefly rising above $1590 per ounce as world stock markets also rallied.
Silver prices rose faster still, gaining 2.2% from Wednesday's low to reach $27.55 per ounce.
The Euro currency meantime failed to rise above $1.23 for the fourth time in a week, however, and Spain was forced to pay 5.2% per year to raise new 2014 loans – a rise in funding costs from 4.3% at the last time of asking in June.
Lawmakers in Berlin were due Thursday lunchtime to vote on the Eurozone's €100 billion credit line to Madrid, under which German tax payers will guarantee 30% of the package.
German debt meanwhile continued to pay new investors less-than-zero as prices rose further, squashing the yield on Berlin's 2-year Bunds down to minus 0.05%.
Consumer price inflation in Germany was last seen at 1.7% per year. Brent crude oil today rose to a 7-week high above $107 per barrel – the highest level since May when priced in the single currency.
"The range in [Dollar prices to buy gold ] is converging," writes Russell Browne at bullion bank and London market-maker Scotia Mocatta in his latest technical analysis.
"While a bearish trend has been in force since late February, trend momentum is weak. [That range] is currently defined by $1554 support and $1613 resistance."
Drawing a 4-year uptrend from the base of Oct. 2008 straight to May 2012, however, "Gold on the weekly chart is heading back down towards the 2008-12 uptrend line at 1559," reckons Axel Rudolph, technical analyst at Commerzbank.
"Sideways consolidation should soon come to an end with a break lower being around the corner."
Over in Asia today, "People are buying and selling [gold] when prices move ten or twenty dollars," Reuters quotes a Singapore dealer.
Such two-way traffic means "We remain range-bound," the dealer says, forecasting that "People are not going to be very hungry for physical materials" until the return of festive demand from India later in the year.
Although the India Meteorological Department says that the current monsoon should improve as August begins – boosting potential incomes for rural consumers to buy gold – "Looking at the current scenario of monsoon, I don't expect much pick-up from here," one Kolkata gold wholesale, Harshad Ajmera of JJ Gold House, is quoted today by the Business Standard.
Overtaking India in early 2012 as world #1 for demand to buy gold, China is looking to develop its domestic gold market, a report claimed in the Wall Street Journal on Wednesday, by encouraging bank-to-bank wholesale trading.
Aiming to launch on 31 August, the move is "a bid help Beijing gain better pricing power amid growing appetite for commodities such as gold," says the WSJ.
China is already the world's #1 gold mining producer nation. Its banks will deal directly with each other, rather than over a formal exchange, says the WSJ's source, thus mimicking the London bullion market, current center of wholesale dealing worldwide.
"Trading has been quite quiet and dull," says one London market-maker in a note this morning.
"Gold is caught into the summer doldrums, and I think the Olympic Games will take their toll on the trading flows."
London commuters are being repeatedly warned to expect long delays when the Games – held near the Canary Wharf financial district – begin a week tomorrow.
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.