Gold Rally “Triggers Buy Stops” as Oil & Sugar Lead Commodity Surge

By Adrian Ash, GoldSeek

London Gold Market Report

THE PRICE OF GOLD eased back from its strongest Dollar and Euro prices in nearly three weeks in London on Tuesday, holding above a one-month high of £700 per ounce for UK investors as European shares and US stock futures held flat.

The CRB commodities index rose almost 2% as sugar neared a three-decade high and US crude oil contracts touched $82 per barrel – more than twice the price of 12 months ago.

Consumer price inflation in the 16-nation Eurozone leapt in Dec. to a 10-month high, the Eurostat agency said Tuesday morning, unwinding the last of 2009′s second-half deflation.

“Buy stops were triggered” as gold rose late in Asia says a Hong Kong dealer today, with professional traders re-entering the gold market after last month’s 12% drop.

“The Dollar remains the key driver,” says an analyst’s note. “All commodities have benefited from an increase in risk appetite.”

But “Buying interest in the physical market seems to have faded on gold’s [1.8%] rally yesterday,” says Standard Bank’s daily commodity briefing.

“We need to see much more Dollar weakness on a trade-weighted basis to sustain a rally in gold.”

Monday saw the 1128-tonne SPDR Gold trust shed five tonnes of the gold backing its exchange-traded shares, the first such drop in almost a month but only equal to the annual 0.4% expense ratio it charges stock-holders.

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