Sunday, March 6, 2011

Gold Struggling to Hold $1400 Level

Gold prices are struggling to maintain momentum even as questions about the euro-zone rise and the G20 meeting of leaders sputters to conclusion. The apparent culprit: the resilient greenback.

But the buck is having a rough day, which means we could see a rally in gold before the end of New York’s session. After some strong jawbone from euro-zone leaders in Seoul, the euro has bounced into positive territory. The yen is stronger, too.

Rhiannon Hoyle, my colleague at Dow Jones, reports that spot gold is down almost 2% at $1383.75 a troy ounce this morning in Europe. The London morning gold fixing was $1387.00. Gold prices shot above $1400 earlier this month but it has struggled to hold that level.

Goldbugs, naturally, see no reason to get concern. “Given the seasonal tendency of gold to maintain overall upside price momentum into year-end, coupled with the U.S. Federal Reserve’s commencement of an eight-month program of adding funds to our economy, I can’t help but walk away with the idea [that] possibly much higher prices are on the horizon,” said Ira Epstein, managing director of the Ira Epstein division at the Linn Group.

Director of his own eponymous division?

Over at (wonder what they like?), Adrian Ash, head of research, says $1400 gold does not mean we are headed back to the gold standard, no matter how much people want to twist World Bank Chief Robert Zoellick’s words.

All the gold mined is worth $7.6 trillion, which is just 3.9% of the world’s investable wealth, he says. A gold standard price covering investable wealth would be $6650 in 2015, based on current mining rates. Covering total money supply? He estimates more than $10,000. About 10,000 more reasons the gold standard is unlikely.

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