Gold prices are up about 1%. That’s pretty good when compared to the falloff in other assets favored by the risk-taking classes. Stocks are down. Crude is down by even more. Apparently, rumors about China buying gold are behind much of the metal’s outperformance Thursday. Dow Jones’ Devon Maylie reports:
Gold was taken for a ride Thursday after a rumor from a little known Web site that China is in talks to buy 191.3 metric tons of the metal from the International Monetary Fund gathered steam.
The rumor, unsubstantiated and reported online on Rough & Polished, caused the precious metal to rally $10 a troy ounce in a knee-jerk reaction, pushing the market back above $1,100/oz late in the London trading day.
Gold then quickly fell $10/oz, weighed by the euro and the realization that the rumor was just that, so far.
Talk of China’s diversification potential away from dollars and into hard assets such as gold has been a hot topic of late and a bullish argument for gold by some commentators.
Gold market information provider Goldessential.com kick-started the chain of events Thursday by sending around an email that cited the Russian FinMarket news agency. It noted in the email that the rumors hadn’t been confirmed as fact.
The Russian news agency had picked the story up from the diamond Web site, but removed it from the site later in the day.
Even Goldessential told Dow Jones Newswires: “We don’t attach much importance to it,” adding that it was discounting the news as a rumor.
That didn’t stop the Web site link from spreading.
The IMF said it wouldn’t comment on the report.
Last year, the IMF earmarked 403.3 metric tons of gold for sale to raise funds for poorer nations. So far it has been able to sell 212 tons of this to India, Sri Lanka and Mauritius.
But the IMF announced last week that no further central bank buyers had emerged so far and it was thus beginning the next phase of sales, onto the open market. It added that a central bank could still be a buyer of the remaining 191.3 tons, however.
In short, when it comes to gold, traders seem to be heartily embracing that old chesnut “buy on the rumor.”
We’ll see if they get a chance to sell the news.
