Daily gold report: Thursday 12th July

Gold prices rose steadily through the Asian and early London sessions on Thursday, touching $665 per ounce for US investors as the US open drew near.

Gold also recovered more than 0.7% from yesterday's low against the British Pound, but rose more slowly versus the Euro, only just breaking €482 per ounce.

'Funds are shifting more into gold for safe-haven reasons as currencies, stocks and bonds are all volatile now,' said Tatsuo Kageyama, an analyst at Kanetsu Asset Management in Tokyo, to Reuters earlier.

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Japanese stocks slipped 0.4% by the close today, while Europe's bourses crept higher to undo Wednesday's 0.3% loss in the EuroFirst 300 index. Wall Street futures were flat.

For Japanese gold buyers, spot prices held above 81,000 this morning, more than 3% higher from the low of late June. The April '08 gold futures contract traded at the Tocom gained 0.4% today, closing at the equivalent of $670 per ounce.

'The gold market is gathering a lot of interest on price dips,' says Kageyama, 'as technical sentiment improved after breaking through $665 yesterday.'

According to technical analysts interviewed by Reuters, the key level of $665 per ounce marks the 50% retracement of gold's drop from the April top of $693 to the June low of $638.90. 'While gold did trade through the 100-day moving average [now at $663.83] and the key $665 resistance level on Wednesday,' said Standard Bank in Johannesburg earlier today, 'the metal really needs to post a closing above at least one but preferably both markers before any chance of a rally to the next target at $674.

'Repeated failures would only encourage a build-up of downward pressure that could threaten to force the metal lower into the $645 area, being the lower edge of the current range.'

In the currency markets the US Dollar continued to slide overnight, with the British Pound re-testing Wednesday's new 26-year highs above $2.0370 before pulling. The Euro touched a new all-time high of $1.3790.

Ten-year US Treasury yields slipped two pips to 5.07% as government bond prices rose. In Tokyo, shares in Nomura Holdings lost 2.7% after a report from Deutsche Bank warned that Japan's largest securities firm may suffer losses related to complex derivatives based subprime US homebuyers' loans.

'The basic tone for all precious metals at the moment is range-trading, but the downside is limited because of strong physical demand,' reckons Nobito Kaneda, a Japanese trader at Sojitz Corp. in Tokyo. 'Gold dipped below $660 yesterday and attracted some buying.'

Gold demand rose strongly in both India and Turkey earlier this week, according to analysts at Goldman Sachs. On the supply side, meantime, the latest US Geological Survey reports higher production in April from March up 4% per day. But US gold mining output slipped from a year earlier, sliding 6% from the 2006 daily average.

Business Report in Johannesburg says that the Solidarity labor union has today rejected the 7% pay offer made by South Africa's leading gold mining companies. AngloGold Ashanti, Gold Fields and Harmony Gold Mining had already raised their offer from 6%. Further talks between Solidarity, the National Union of Mineworkers and the United Association of South Africa will be held on July 23rd.

Adrian Ash is editor of Gold News and head of research at www.BullionVault.com, the fastest growing gold bullion service online