Gold-Euro Link Turns Negative as Chinese Savers – World’s No.2 Buyers – Hit by Sub-Zero Interest Rates

By Adrian Ash, GoldSeek

London Gold Market Report

THE PRICE OF WHOLESALE gold bullion ticked higher early Thursday for Dollar investors, but slipped further for Sterling and Euro buyers as world stock markets again held flat together with commodities.

Government bonds fell, pushing the yield offered by 10-year UK gilts up to a 2-week high of 4.14%.

Ten-year US Treasuries offered 3.74% p.a., more than three-and-half percentage points above the yield offered by short-term debt.

“With a US rate hike likely within the next six months, gold may be in for a tough time if it does not find some direction shortly,” reckons one London dealer in a note.

“There are lot of buy orders below $1100,” counters Pradeep Unni, senior analyst at Richcomm Global Services in Dubai, speaking to Reuters.

“If we don’t find any clarity with respect to Greece and neighboring nations, gold will continue to fight bearish pressure.”

Greek public services were once again closed by a national strike on Thursday. Typically moving together against the Dollar, gold and the Euro in fact split apart when the Greek budget crisis first broke at the start of Feb.

Initially seeing Dollar-gold prices rise while the Euro/Dollar exchange rate fell, gold now stands flat from the start of March, while the Euro has added 2¢ to $1.3650.

On a rolling one-month basis, the daily correlation of gold and the Euro – averaging a strong +0.51 over the last decade – fell this week to minus 0.35, its most negative reading since March 2009.

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