The gold price
Gold rises even as US, Tokyo and Singapore shut - 2 January 2007
Gold rose for a sixth session running in Asia, before holding onto its gains in the European session. Electronic trading on CME Globex in the US has seen gold climb nearly $4 for the day.
The sharpest gains have come for Dollar and Yen investors, as Sterling and the Euro have continued to rise on the foreign exchange market. Both the ECB and Bank of England are expected to raise interest rates again soon, either at their policy meetings next week or early in February.
US rates have paid better returns since the summer of '06, but speculators have still driven Euros and Sterling higher in anticipation. Today the Pound hit a new 8-year high against the Japanese Yen. By the opening in London, its strength meant the rise in gold had been capped for Sterling investors at £325 per oz.
The trade-off between British Pounds and Japanese Yen is just one example of the worldwide "carry trade". Professional investors borrow money that's charging low interest rates. Then they invest in a higher-rate currency.
And right now the Yen costs barely 0.25% per year. The Pound pays 5.0%. Simple, no?
But the size of the carry trade...and the clever new financial instruments that have been dreamt up to capitalise on it...might give you pause for thought today. To read the full story now, click here...
Adrian Ash runs the research desk at BullionVault, the physical gold and silver market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern and FT Deutschland; Italy's Il Sole 24 Ore, and many other respected finance publications.
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