Gold might have paused on Friday, but that was understandable given some of the wild stories doing the rounds during the week.
The most amazing was the supposed leak by a German ‘banker’ that Germany was going to abandon the euro tonight and move back to the deutschemark.
The ‘banker’ had seen newly printed deutschemark notes and pfennig coins.
That story spread and no doubt helped drive up demand for gold coins in Germany late in the week.
The Financial Times reported:
"Panicking German dealers and banks have been desperate to get their hands on krugerrands, the world’s most popular gold coin."
"But there is no indication that Germans are ready to stop buying.
"Panicked by the possible inflationary implications of this week’s 750 billion euro bailout, they have been snapping up gold coins and small bars at a faster rate than in the aftermath of the Lehman Brothers bankruptcy."
Other outlets also reported that demand for coins has been so solid in Europe and the US that there is a shortage. Krugerrands are selling for a premium of 6% in the secondary market in Germany.
Some gold dealers also report a flood of interest in coins from funds and big investors.
So it’s no wonder the physical price surged through record after record during the past week.
Sales of South African, European and US coins, bars and exchange-traded gold funds surged this week and open interest in COMEX futures rose to an all-time high on Thursday.
Friday saw spot metal down around 2.4% after hitting a high of $US1,248.95 an ounce.
Comex June gold settled at $1,227.80.
Dealers warn that the enthusiastic buying of the past couple of weeks has pushed gold into what looks like an overbought position.
They point out that gold’s last foray above $US1,200 an ounce in December was quickly followed by a big correction with prices falling 5% within a day of the then high of $US1,226.10 being reached.
The surge in the past couple of weeks has also come on top of one of the big gold buying seasons in India, the world’s biggest buyer of gold.
It was the festival of the Akshaya Tritiya at the weekend which is a time when Hindus traditionally buy gold and gold jewellery for good luck,
The very high prices have slashed Indian gold buying in the past nine months to a year and there were reports of weak sales last week.
But when that demand drops out of the market from this week, prices could lurch downwards if there’s a sudden bit of better news from Europe.
Such has been the level of demand for coins that the US Mint sales of its very popular American Eagle one-ounce gold coins have totalled 72,500 ounces so far in May, exceeding the 60,500 ounces sold in April.
Investment interest in physical gold was strong, with holdings of the world’s largest gold-backed exchange-traded fund, New York’s SPDR Gold Trust, at a record high 1,209.5 tonnes on Thursday.
The fund’s reserves are up 6%, or more than 68 tonnes, in the past four weeks.
This trust holds more gold than either Switzerland or China (which has been an active buyer of late).
In other precious metals, silver fell to $US19.25 an ounce against $US19.41 on Thursday, platinum was at $US1,713.50 an ounce against $1,731.50 and palladium at $US525.50 against $US537.
Among the industrial metals, copper lost ground last week (it’s the most traded commodity after oil and gold).
Comex July futures dropped 9.75 US cents, or 3%, on Friday, ending at $US3.134 a pound. That left it down 0.3% over the week.
And three month copper on the London Metal Exchange fell 3.3% to $US6,926 a tonnes, or $US3.14 a pound.
Lead shed 6.1% to $1,940 a tonne and nickel was pounded for another week.
Nickel dropped 5.4% on Friday, to be down 4.4% over the week.
It fell 14% in the week to May 7.
Three month aluminum lost 3.2%, zinc lost 4.9% and tin fell 1.4% on Friday as well.
