Wednesday, July 20, 2011
Gold Bounces as Euro Hits 2009 High, But "No Strong Investment" Despite US Hyper-Inflation Fears
9:14 AM | 
Posted by
bayan |
THE PRICE OF WHOLESALE GOLD bounced in London on Tuesday morning, reaching $983 an ounce for Dollar investors and recovering from near 5-week lows versus the British Pound.
The Gold Price in Euros held steady at €689 as the single currency also leapt, jumping to new 2009 highs against the Dollar above $1.4270.
"Upside for gold could be limited today," reckons Walter de Wet at Standard Bank in a note. "There were fairly large volumes of physical gold selling [on Monday] when the price moved above $980."
But with US Treasury bond prices down more than 5% for the year to date, and "while higher yields increase the cost of holding gold in the longer run," de Wet adds, "right now it signals reduced investment appetite for exposure to the US and a weaker Dollar."
"Don't be complacent and think there isn't any alternative for China to buy your bills and bonds," warned former central-bank advisor Yu Yongding - scheduled to meet US Treasury secretary Tim Geithner in Beijing today - in an interview on Monday.
"The Euro is an alternative. And there are lots of raw materials we can still buy."
According to data from Bloomberg , foreign investment in US Treasury debt rose nearly $69 billion in May, with strong foreign demand for last week's auction of $101bn in new bonds.
The Federal Reserve will continue its $300bn "quantitative easing" of longer-term interest rates by purchasing 10- and 2-year bonds in the open market tomorrow and Thursday.
"Most of the ongoing rally in the precious metal is more driven by a stark weakness in the US Dollar than the risk averse buying we saw last winter," agrees Andrey Kryuchenkov at VTB Capital in London,
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