Gold Continues to Consolidate after G20 Meeting

THE PRICE OF PHYSICAL GOLD traded on the wholesale market reversed an early 0.7% rally vs. the US Dollar on Monday morning, while world stock markets fell for the 7th time in eleven Nov. sessions to date.

Both the Euro and Pound Sterling slipped back from an early 1.5% jump vs. the US currency, leaving Gold lower for British and European investors.

Crude oil slid from $56 to $51 per barrel as government bond prices rose yet again – pushing the yield paid to new buyers of 10-year US Treasury debt down to 3.71% – despite the G20 meeting of political leaders in Washington this weekend vowing to “use fiscal measures to stimulate domestic demand” while taking “whatever further actions are necessary to stabilize the financial system.”

(For those phrases, read “a flood of new government debt” plus “unlimited bail-outs for failed institutions…)

A joint committee on cross-border regulation of the financial markets is now scheduled to report on March 31st next year.

“The precious metals are continuing their consolidation,” says today’s note from Mitsui in London.

(ARTICLE CONTINUES BELOW)

• A d v e r t i s e m e n t

“Gold is doing better that the more industrial metals, with the pressure on the auto industry capping the [platinum group metals].”

Latest data, released overnight, show Japan sliding into recession between July and Oct. as gross domestic product contracted for the second quarter in succession – the sixth such technical recession since Tokyo’s equity and real estate bubble burst at the end of 1989.

Across the Pacific, $22 billion of the $25bn rescue bill for auto-makers now before Congress could be eaten up by General Motors alone, according to a report from Goldman Sachs.

The investment bank has also suspended its rating of GM’s stock, suggesting that – after falling 91% over the last 12 months – the equity is now worthless.

The 15-nation Eurozone saw its net trade balance improve only slightly to minus €5.7 billion during September. And here in the United Kingdom today, the Rightmove index of residential-property asking prices showed a 2.9% drop for Oct. after sellers hiked their expectations by 1.0% in Sept.

“Maybe investors are a bit more cautious about gold as a safe haven asset given that the price, obviously, compared with a couple of months ago, has fallen,” says David Moore, a commodities analyst with Commonwealth Bank in Sydney, Australia.

“The Gold Price has also been very volatile at times as well. I think there’s a preference for cash at the moment.”

For Australian investors, gold has retreated by one-fifth since early Oct., when it shot to new all-time highs above A$1,400 an ounce.

Trading above A$1,130 today, Gold Bullion remains nearly twice the price of this time three years ago.

“Liquidity will probably deteriorate even more as we move into December,” reckons Steven Barrow, writing today for Standard Bank in London.

Full article here