Gold Jumps Within 2% of 2009 High on Strong Volume; "Stock Slide Won't Help Dollar" - Thursday 3^rd September 2009

The Gold Price touched new 3-month highs vs. Dollars, Euros and Sterling early Thursday as stocks in emerging Asia rose but Tokyo shares fell.

European stocks were flat. Crude oil rose $1 per barrel, but held 8% below last week's nine-month high at $75.

For US investors Buying Gold early Thursday, the price came within 2% of its 2009 high at $1,006 an ounce, trailing the record peak of $1,032 – hit when Bear Stearns collapsed in March '08 – by less than 4.5%.

"For the first time since the stock markets turned round in March, gold seems to be moving under its own steam," wrote Phil Smith for Reuters Technical India this morning.

"At last, gold has broken out of the [summer's] large triangle formation, with a spike in [Gold Futures] volume so characteristic of breaks of long-time patterns like this."

Retreating from its highest level since the spring of 2006, the one-month correlation of daily Gold Prices to New York's S&P 500 index fell to zero on Wednesday.

The daily correlation of Gold Prices to US stocks averaged +0.70 during the range-bound, low-volume action of July and August, showing a strong statistical connection between moves in equity and Gold Investment.

"Fresh investment pushed the gold market through the top of the consolidation pattern at $975 yesterday," says one London dealer, pointing to the June and Feb. highs at $990 and $1,006 as new targets.

"Gold has finally broken out of the topside of our 3-month consolidation triangle," agrees the latest technical analysis from Scotia Mocatta, also in London.

"We expect the market to buy any dip now to 960/965 with only a close back below 950 removing the bullish sentiment."

On the forex markets today, the Euro reversed this week's dip vs. the Dollar after the European Central Bank held its key interest rate at an historic low of 1.0%.

The zero-yielding Japanese ticked back from a 7-week high vs. the US currency below ¥92 per Dollar.

Kiwi Dollars – currently paying 2.5% per year – gained on news that commodity-price inflation in New Zealand jumped to a two-year high in August of 4.8%.

"The recent slide in stocks has given the US Dollar some support," writes Steve Barrow at Standard Bank, "but we don't believe that stock market weakness will help the Dollar over the long haul."

Noting that "The 2000/01 slump in global stocks was not associated with Dollar strength," Barrow says that "if stock weakness does not cause severe risk aversion and a sharp rise in purchases of US T-bills, it is unlikely to strengthen the Dollar."

Government bond prices fell early Thursday, pushing the yield offered to buyers of 10-year US Treasuries – which hit a record low of 2.20% back in January – up to 3.34%.

Both silver and Gold Bullion meantime recorded their best London Fix since June 1st for US investors, plus the best levels priced in Euros and Sterling since June 5th.

Breaking above €685 and £600 an ounce today, gold fell as the US Dollar surged during the stock-market slump of Sept. 2008. Gold and the Dollar then rose together as Western equities sank – and Treasury bond prices soared – towards the 12-year lows of March '09.

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