Gold closed at $1099.70/oz yesterday having lost 0.7%; it then recovered in Asian trading. Gold is currently trading at $1,102.80/oz, and in EUR and GBP terms €814.22/oz & £731.42/oz respectively.
Gold has recovered somewhat from the weakness in Asian and early European trading and this may be due to the dollar giving up its earlier gains.
Sales of previously owned US homes fell less than expected in February and this buoyed equity markets. However, the home sales data underlined the fragile nature of the housing market's recovery and the continuing risks of a double dip recession.
Gold's bounce this morning is likely more due to it being oversold and due a bounce rather than simply a result of the US home sales data. Gold may also have gotten a boost from the continuing uncertainty and squabbling about the Greece debt crisis.
With countries internationally including the US engaged in the greatest monetary expansions in their history, physical demand for gold looks set to remain elevated. Debt monetisation and the printing of money internationally is leading to currency and sovereign risk unprecedented in most investor's lifetimes. While the UK and the US are not Greece, they too have engaged in some creative accounting, particularly with regard to accounting for long term liabilities. Unless major industrial nations get their finances under control and restore some semblance of fiscal discipline then there will be increasing concern about sovereign bond markets and the international monetary system.
South Korea said its gold holdings currently represent about 0.2% of total foreign reserves and government officials have said that the rate of gold holdings in reserves could be much higher. The price of gold increased by more than fivefold over the past decade but the Bank of Korea hasn't done much to take advantage of it. We need to buy more gold to diversify away from a weakening dollar, said Representative Lee Hye-hoon of the Grand National Party.
With gold holdings of Asian and other emerging market central banks remaining very small when compared to the US and European nation's gold reserves, Asian and other emerging market central banks look set to remain net buyers of gold for the foreseeable future.
Silver closed at $16.91/oz with a loss of 0.53% and is currently trading at $16.96/oz, €12.54/oz and £11.26/oz.
Platinum Group Metals
Platinum is trading at $1,597/oz, palladium at $460/oz and rhodium at $2,300/oz.