Fund amasses bullion holding

Gold holdings at the world’s largest bullion-backed exchange-traded fund jumped above 1,000 tonnes for the first time, the latest indication of investor demand for bullion amid increasing financial turbulence and economic slump.

The SPDR Gold Trust holdings have risen 228.6 tonnes so far this year, to a record 1,008.8 tonnes late on Tuesday, absorbing in the first seven weeks of the year about 10 per cent of the world’s annual mine gold output.

Related article: Gold hits record against euro on fear of Zimbabwean-style response to bank crisis (Telegraph)

The fund is now the world’s seventh largest bullion holder, behind a handful of central banks.

The latest bout of buying pushed spot gold in London on Wednesday to a fresh seven-month high of $973.5 a troy ounce, less than 6 per cent below the all-time high of $1,030.80 an ounce set last March. Gold later traded at $963.1 an ounce, down from New York’s last quote of $969.15 on Tuesday.

Silver rose to a six-month high of $14.31, and platinum and palladium also moved higher.

The industry-backed World Gold Council said that gold consumption last year rose 4 per cent to 3,658.6 tonnes as a 64 per cent surge in investment demand was counterbalanced by a 11 per cent drop in jewellery demand and a 7 per cent fall in industrial consumption.

Supply fell 1 per cent last year compared with 2007, lad by a 42 per cent drop in official sales from central banks and a 3 per cent drop in mine output. Gold scrap supply jumped 17 per cent.

The WGC said that the extreme uncertainty that currently surrounds the global economy was unlikely to abate and should continue to underpin net investment demand, particularly for bars and coins. “However, we expect this to be partly offset by ongoing weakness in both industrial and jewellery demand,” it added.

In the energy market, ICE April Brent was 25 cents higher to $41.28 a barrel while Nymex March West Texas Intermediate rose 2 cents to $34.95 a barrel. Traders and policymakers consider the WTI contract now as less representative of the global oil market because of rising inventories at its delivery point in Cushing, Oklahoma.

Nigeria said the oil market remained oversupply in spite of the Opec oil cartel string of production cuts. Opec will meet on March 15 in Vienna and some member countries have suggested it could decide to cut output further.

The surge in precious metals and some stability in the oil market was in stark contrast with losses elsewhere in the commodities markets.

Base metals were weaker with the exception of copper, which posted a small gain. Aluminium for delivery in three months at the London Metal Exchange was down 0.8 per cent to $1,320 a tonne, the lowest level since late 2002. Lead fell 2.1 per cent to $1,087 a tonne.

Agricultural and soft commodities were also weaker, reversing some of their gains of January and early February. Heavy rains in drought-hit Argentina’s agricultural belt depressed soyabean, corn and wheat prices. CBOT March soyabean loss 4½ cents extending its drop to $8.89½ a bushel while CBOT March corn fell ¼ cent to $3.49 a bushel. CBOT March wheat fell 3¾ cents to $5.11 ¾ a bushel.

ICE March raw sugar lost 1.2 per cent to 12.82 cents a pound while Liffe May cocoa was 1.5 per cent down to £1,881 a tonne.

By Javier Blas in London
18 Feb 2009 3:00pm

Source: Financial Times

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