Wednesday, August 28th 06:36 PM IST

Syria sparks "classic flight to safety" in Gold investment: Analysts

# Gold  # Gold Market  # Gold prices  # Gold demand  

Gold prices in Indian Rupees touched fresh record highs as the #1 gold consumers' currency sank to fresh lows on the FX market.

Adrian Ash
BullionVault

London Gold market report

Gold investment prices touched their highest level since mid-May in London on Wednesday morning, trading briefly at $1433 per ounce before edging $10 lower as European stock markets extended yesterday's losses.

US crude oil added another 1.2% to hit 2-year highs above $110 per barrel.

US Treasury bonds fell, nudging interest rates higher, even German and UK debt prices rose.

"The possibility of US military action against Syria is driving demand for safe-haven assets including gold," reckons commodities fund manager Jeffrey Sherman at Los Angeles-based $56 billion DoubleLine.

UK prime minister David Cameron said Wednesday he's pushing for a UN resolution"authorising necessary measures to protect [Syrian] civilians" following this month's chemical weapons attack.

"This is a classic case of a flight to safety," agrees Mike Meyer, assistant vice president at EverBank World Markets, talking about gold investment to CNN.

"The tension in Syria, as well as Egypt a few weeks ago, have set the wheels in motion for gold to rise."

But "Helped by a thin trading environment, gold was immediately treated as safe haven" after last Friday's poor US home sales data, says the latest weekly report from German investment-bar and refining group Heraeus.

"With the summer coming to an end, general demand is picking up again and we see in the current environment sufficient support for gold to stay around the current level."

Starting in early August, says Credit Suisse's Tom Kendall, speaking to Reuters, "you've had something of the order of 6 million ounces of short-covering going through on the Comex futures and options market."

That turnaround in short-term gold investment sentiment "has been playing into it as well," says Kendall.

On a technical basis. "Gold has been rising within an up sloping channel since July and within a steeper one since early August," write chart analysts at French investment bank Societe Generale today.

Investment gold is now "nearing the channel upper limits," the SocGen analysts believe, "with hourly indicators...suggesting 1437/41 to be a key graphic level."

"We will retain our longer term bearish forecast," says Axel Rudolph at Germany's Commerzbank, "while the gold price remains below the 1424.05 June high on a daily chart closing basis.

"The current corrective rally higher should be followed by another decline back to the $1300/1250 region."

Rising 20% from their near 3-year low in Dollar terms at end-June, prices for wholesale gold bars also broke new multi-week highs today against all other currencies.

Investment gold priced in Australian Dollars today leapt above A$1600 per ounce, the highest level since February 12.

Gold prices in Indian Rupees touched fresh record highs as the #1 gold consumers' currency sank to fresh lows on the FX market.

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