Bullion Desk

Spot gold hits fresh all-time peak on IMF gold sales

November 3rd, 2009

By Royston Wild

Spot gold flew to a new all-time high on Tuesday afternoon in a delayed reaction to news of IMF gold sales to India after spending most of the day in deficit.

Spot gold reached $1,084.20 per ounce, surpassing the previous high of $1,071.10 hit on 14 October, before edging back slightly to current levels around $1,083, up around $20 or 1.9 percent. On the charts, the next resistance levels stand at $1,100 per ounce and $1,120 per ounce - the pennant formation target - with support at $1,051 and $1,047.

"With the dollar stronger today, the upside momentum from gold seems to have driven solely by the bullish news of the IMF's sales of 200 tonnes to India last month," Jono Remington-Hobbs of FastMarkets said.

On Monday, the International Monetary fund announced the sale of 200 tonnes of gold to the Reserve Bank of India - the first such sale for some nine years - equating to around half of the 403.3 tonnes that the fund is looking to sell over the next few years.

The transaction, which is in the process of being settled, involved daily sales phased over the October 19-30 period, with the proceeds equivalent to $6.7 billion.

US gold futures also set a new record on Tuesday, with December gold rising to $1,081.70 per ounce on the floor of the Comex division of the New York Mercantile Exchange and surpassing the previous high of $1,072.00 set on October 14.

"I thought that the World Gold Council statement that central banks will become net buyers was bold, but that proved right within 24 hours - better than any of my forecasts," former UBS analyst John Reade said at the LBMA Conference in Edinburgh.

"With the dollar going the way it is now [down], there is no reason for gold to stop rising," a bullion dealer added. "We could see a new record high this week and possibly a move above $1,100 soon."

US factory orders data for October came in slightly worse than expected, showing growth of 0.9 percent when a rise of 1.1 percent had been expected, although still up from the 0.8 percent decline for the previous month.

In currencies, the dollar remained stronger against the euro at $1.4664 - although it dipped just short of the $1.47 mark as gold rallied - while the US dollar index remained steady around the mid-76 mark at 76.53.

In other markets, the FTSE 100 closed down1.3 percent, with the Dow Jones 0.6 percent lower. Crude oil spent much of the day in deficit but was last at $79.10 per barrel, up 90 cents.


Although the US Federal Reserve is expected to keep rates at 0.25 percent when it convenes on Wednesday for its two-day policy-setting meeting, there is some speculation that it may backtrack on its earlier pledge to keep rates low for an "extended period" by changing the wording of its accompanying statement.

On Thursday, the European Central Bank and the Bank of England are also expected to keep rates unchanged at one percent and 0.5 percent respectively. But the BoE may increase its asset purchase programme to boost the economy.

The Reserve Bank of Australia raised its cash rate as expected for the second month running to 3.5 percent from 3.25 percent but left the market guessing as to whether it would raise them again, possibly as soon as December.

US non-farm payrolls data on Friday could provide the precious metals complex with fresh direction, following positive Chinese and mixed US economic announcements in the week to date.

In other precious metals, silver tracked gold higher to reach an intraday peak of $17.07 per ounce - a one-week high - before receding to $16.94/$16.99, up 37 cents.

Platinum rose $6 to trade at $1,342/$1,346 per ounce but sister metal palladium fell $1 to $324/$328.

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