Japan's grannies drive up gold prices -
Tuesday, 16th October 2007
Gold has soared to a fresh 28-year high of $760 (£372) an ounce
on fears of global currency disorder and a surge of buying by
Japanese investors using exotic trading signals.
Traders report a sudden burst of activity on the TOCOM gold
futures markets in Tokyo as the price breaks through the
psychological barrier of 3,000 yen (£12.52) per gramme,
the measure used by the Japanese to trade gold.
The country's irrepressible grannies rely heavily on Ichimoku
"cloud charts", multi-faceted indicators designed to give
support/resistance levels in various markets, which have
issued a powerful buy signal in recent days.
John Reade, head of precious metals at UBS, said the Japan can
be a major driver of the gold price.
"Japanese buying can come out of the blue, but it is too
soon yet to tell whether they are about to take over the
gold market," he said.
"When the Japanese public move in with reckless abandon,
everybody else gets out of the way.
They can be the last to join the rally."
The fresh interest in gold comes as the yen renews its
slide, hit by signs that the economy may be tipping back
into deflation after the housing collapse during the summer.
Housing starts fell 23.4pc in July and 43.4pc in August as
new laws came into effect.
The Bank of Japan has signalled that it will keep interest
rates at 0.5pc for the foreseeable future, inviting funds
to step up borrowing in Tokyo to chase higher yields
elsewhere through the global "carry trade".
Rising inflation across China, India, the Middle East,
eastern Europe and Latin America have all created the
backdrop for a major move in gold.
Citigroup said a global "reflation rally" caused by cuts in
US interest rates could push prices above $1,000 an ounce.
UBS has upgraded its long-term forecast, but is cautious
for now. "The net long positions on the US futures markets
are at all-time highs. They have been at extreme levels
for four weeks and when that happens you can be sure
there will be a correction.
It could be any time now," said Mr Reade.
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