Showing posts with label Gold bullion. Show all posts
Showing posts with label Gold bullion. Show all posts

Tuesday, May 26, 2015

Precious metals rally consolidates

 

Precious metals rally consolidates - gold and silver 2015 US

 

Gold and silver rallied strongly last Friday and into Monday’s overnight trading (UK time) before spending the rest of the week drifting lower from initial highs to consolidate above notional support at $1200 and $17 respectively. As of first thing this morning, UK time in US dollars gold is now up 2.2% and silver 10.2% on the year.

From observing price action, there appears to be continuing underlying physical demand, and on Wednesday the Russian Central Bank confirmed that it had taken the opportunity of sub-$1200 prices to add 300,000 ounces of gold to their official reserves last month. It is also reasonable to suggest that in times of increasing economic and systemic tensions in the Eurozone, some central banks will swap euros for gold to rebalance their reserves.

The Fed released April’s Open Market Committee minutes on Wednesday, which on balance was little more than another holding operation on interest rates, not bringing them forward to June or putting them off to next year. Apart from some minor volatility on their release there has been little effect on precious metal prices.

The next chart is of the gold price in the other three major currencies since 31 December 2014

Precious metals rally consolidates - gold price 31 Dec 2014

In terms of gold prices, the best performance has been in weakening euros with gold up 11.4% so far this year. The European central Bank announced it would look to accelerate its bond purchases in the short-term, leading currency markets to conclude that economic conditions in the Eurozone are weaker than expected, and with the deteriorating Greek situation euro weakness should come as no surprise.

Finally, it is worth drawing attention to developments on the Hong Kong Stock Exchange, where first Hanergy Thin Film fell 47% on Wednesday, wiping $18.6bn off its capitalisation before trading was suspended. This was followed yesterday by a similar collapse in share price for Goldin Financial (Hanergy’s broker) and Goldin Properties, together wiping out a further $16.6bn.

These events are typical ahead of a speculative blow-off in markets, and while Hong Kong’s Hang Seng Index appears to have risen broadly in line with major equity markets, other smaller markets in the region reflect excessive speculation. For example, on the Shenzen Market equities are trading at an average of 67 times earnings, having risen by 12% this week alone, and there are instances of new listings rising more than ten or twenty times in less than a month of trading.

Therefore, there is a growing risk that Hong Kong and Chinese equities could become a financially destabilising risk in the region and possibly further afield, adversely affecting other markets and potentially precious metal demand.

Source: GoldMoney

Thursday, December 19, 2013

Gold Market Report - Thurs 19 Dec

 

Fed Tapering Whacks Gold, Spooks China, "Normalization" Challenged by US Earnings

WHOLESALE London gold sank against all currencies Thursday morning, falling 1.9% vs. the Dollar to hit 6-month lows after initially trading flat overnight despite the US Fed finally reducing its $85 billion per month in asset purchases.

Cutting next month's quantitative easing of US mortgage and longer-term government bond rates to $75bn, the Fed pointed to "growing underlying strength in the broader economy."

US stockmarket indices the S&P500 and the Dow surged to new all-time closing highs, while Treasury bonds fell and spot gold fell through this week's previous low at $1230.

Besides the taper, however, the Fed revised its policy on short-term interest rates, saying it will hold the federal funds rate at zero "well past the time" that the US jobless rate falls to 6.5%, its previous line in the sand.

Overnight in Asia, Japanese shares rose but Chinese stocks fell as the People's Bank of China broke its own rules and took to Weibo, the equivalent of Twitter, to announce a "short-term liquidity operation" after Shanghai's interbank lending rate jump above 10%.

The PBoC usually waits a month before reporting such moves, says the Financial Times.

"It's very clear they want to calm down market fears," the FT quotes ANZ analyst Zhou Hao, noting the previous spike in Chinese interest rates in June, when US Fed chairman Ben Bernanke spoke about possible QE tapering.

Shanghai gold today fell 0.8% in Yuan but increased its premium over international prices from $6 to $11 per ounce.

Amongst Western investors, "More sensible minds realise," says a note from David Govett at brokers Marex, "that on the whole [the Fed news] is not a good move for the precious complex.

"With further tapering probably to come over the course of next year, the outlook remains muted. However, I don't subscribe to the theory that it's all over for the bullion market [and] would be a buyer of dips if we do manage to break below $1200."

Bids in London's wholesale market briefly dropped below that level Thursday morning, hitting a 6-month low of $1199.75 per ounce.

Priced in Sterling and Euros, wholesale gold bullion fell to its lowest since spring 2010, down 29% and 31% respectively from the start of 2013.

Silver tracked gold in Dollars, briefly falling below $19.30 per ounce – a "key level" according to technical analysts at one bullion bank.

Fed tapering "highlights the overall positive sentiment towards the macro economy," reckons UBS analyst Joni Teves.

"Equities are in fierce competition with gold for investor dollars, and this year's trend of rotation away from gold into growth assets is expected to continue into 2014."

"This is another sign of increasing normalisation for the world economy," agrees Matthew Turner at Macquarie Bank. "Gold's insurance function is less desirable in that environment."

"But if the economy is accelerating as people think," counters Albert Edwards in his latest Global Strategy Weekly for clients of French investment and London bullion bank Societe Generale, "how come Thomson Reuters has just reported the fastest pace of US earnings downgrades on record?

"If we are set for a profits-driven economic slowdown, then the low rate of core inflation will start to become a key concern. Deflationary forces are in fact stronger than even the latest [official data] suggests."

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Wednesday, February 27, 2013

Gold Market Report 27 February

Fundamentals "Still Supporting Gold" as Bernanke Testimony "Shows QE Has Long Way to Go"

U.S. DOLLAR gold bullion prices fell slightly in Wednesday morning's London trading, but held above the $1600 per ounce level it rallied above yesterday after Federal Reserve chairman Ben Bernanke  told Congress that that Fed's ongoing quantitative easing policy "is providing important support to the recovery" and that the benefits "are clear".

Stock markets also posted gains this morning, making up some ground lost yesterday, while commodities were broadly flat and longer-dated US Treasuries gained.

Like gold, silver eased lower this morning but held above $29 an ounce by lunchtime in London.

In his testimony to the Senate Committee on Banking, Housing and Urban Affairs, Bernanke added "inflation expectations appear well anchored" and that the Fed does not expect to see "the development of significant inflation pressures".

Bernanke also reiterated the importance of keeping the federal funds rate close to zero.

"Keeping long-term interest rates low has helped spark a recovery in the housing market and has led to increased sales and production of automobiles and other durable goods," he said.

On the New York Comex the number of gold put options, which rise in value as gold falls below a given strike price, rose to a record following the publication of the latest Fed policy meeting minutes last week, according to news agency Bloomberg.

Following Bernanke's testimony yesterday however "the market is a little less concerned about a premature exit of quantitative easing, which would be bad for gold," says Nick Trevethan, senior commodity strategist at ANZ.

"Don't forget that the Fed's focus is on jobs and inflation. The job market has stabilized, but we are not seeing efficient job growth to make the exit of QE look imminent. There is still a long way to go."

Britain's economy meantime grew by 0.3% in 2012, according to the second estimate of fourth quarter gross domestic product published by the Office for National Statistics Wednesday, which revised last year's growth estimate up from zero. The Q4 contraction of 0.3% reported in the first estimate however remains unchanged, while government spending rose 0.6% over the quarter and 2.6% over the year as a whole.

"Government spending can't be sustained at that level," says Deutsche Bank economist George Buckley, "so an important part of economic growth is actually going to be taken away and the risk is that exports remain negative and that consumption weakens because of higher inflation."

The Bank of England's Monetary Policy Committee has discussed the possibility of setting negative interest rates, MPC member and BoE deputy governor Paul Tucker told the Treasury Committee yesterday.

Holdings of bullion held to back gold exchange traded funds meantime are on course for their biggest calendar month drop since April 2008, according to data tracked by Bloomberg.

"The [gold] market has lost increasing support this year in line with other perceived 'safe havens' such as the Japanese Yen, Swiss Franc and US Treasuries," says a note from Deutsche Bank this morning.

"We expect gold returns will eventually recover although this will most likely require a moderation in growth expectations and with it a correction in global equity and interest rate markets."

"The fundamental background for gold remains reasonably supportive," adds a note from Credit Suisse.

"It is rather that potential gold investors consider other classes more attractive...investors have the tendency to buy less of the precious metal in an environment where growth is stabilizing."

Gold bullion imports worth $2.7 billion contributed to Thailand's record trade deficit last month, the country's Commerce Ministry revealed Wednesday. Over the whole of 2012 demand for gold from Thailand was worth $4.3 billion, according to latest World Gold Council figures.

The volume of gold imported by Thailand rose 133% year-on-year, Ministry figures show, although its report did not include figures for gold exports.

Last week India, the world's biggest source of private gold demand, banned imports of gold jewelry from Thailand unless the authorities can be satisfied that the work in making the jewelry had added at least 20% to its value over and above that of the bullion content.

India last month raised its import duty on gold to 6%, although a trade agreement with Thailand meant that gold imported from there was only subject to a duty of 1%.

Ben Traynor

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Tuesday, February 5, 2013

Gold Market Report 5 February

Gold "Could Test Resistance After Consolidation", Chinese Gold Imports from Hong Kong Set New Record

WHOLESALE MARKET gold bullion prices rose above $1680 an ounce Tuesday morning in London, trading close to last week's high, as stocks, commodities and the Euro also gained and US Treasuries fell, following better-than-expected services sector data from Europe.

Silver meantime touched $32 an ounce for the first time this week.

"We will remain short term bearish [on gold] while resistance [around $1696 per ounce] caps," says Axel Rudolph, senior technical analyst at Commerzbank.

"Should this resistance zone unexpectedly be overcome, however, our medium term bullish forecast will be reinstated with the 1750 region then being targeted."

"The January 4 low at $1625 is pivotal," add technical analysts at Scotia Mocatta,"and there should be good support there...the consolidation since that date may indicate gold is forming a base."

Sentiment towards gold among western households grew less bullish last month, according to data published by BullionVault Tuesday.

The Gold Investor Index, which tracks buying and selling on the world's largest physical gold market for private investors online, fell to 54.9 in January, down from a 12-month high of 58.3 a month earlier and its lowest reading since September. A figure above 50 indicates more net buyers than net sellers over the month.

Weekly data published by the Commodity Futures Trading Commission last Friday meantime show the speculative net long position of gold futures traders, a closely-watched measure of futures market sentiment, fell to levels not reported since August during the week ended last Tuesday, indicating reduced bullishness among traders.

Over in India, traditionally the world's biggest source of private gold demand, the government's "anti-gold" stance  means Indian gold demand "is going to face a difficult year", according to Philip Klapwijk, global head of metal analytics at precious metals consultancy Thomson Reuters GFMS.

"Comparing demand last year with 2011, we see this rather strange phenomenon that India was the standout for the country where demand collapsed the most," Klapwijk told a conference in cape Town Monday.

"In other parts of the world, they shrugged off the 6% increase in gold prices rather well and in other parts we saw growth in jewelry demand."

Gold bullion imports to China through Hong Kong nearly doubled in 2012, hitting a record 834.5 tonnes, the island's Census & Statistics Department said today. 

Now the world's largest gold consumer as well as the number one mining producing nation, however, China also trebled its exports of gold through Hong Kong, the data show.

Gold bullion imports net of exports rose 56.0% to 523.6 tonnes on BullionVault's maths.

China's central bank meantime injected a record 450 billion Yuan ($72 billion) into the country's money markets Tuesday ahead of next week's Lunar New Year holiday.

Bank of Japan governor Masaaki Shirakawa announced Tuesday that he will step down three weeks earlier than scheduled, and will now leave his post on March 19.

At its most recent policy meeting, the BOJ doubled its inflation target from 1% to 2% and announced it will launch open ended quantitative easing once the current round of QE ends next year. 

The BOJ's move was largely expected, having been called for by prime minister Shinzo Abe following his election victory in December, and was described as "threatening an end to central bank autonomy" by the head of Germany's Bundesbank Jens Weidmann.

"[Shirakawa's] resignation will likely push forward the timing of bold monetary easing action [by the BOJ," reckons Akito Fukunaga, chief rates strategist at RBS Securities Japan in Tokyo.

"Shirakawa has probably judged that it's better for the BOJ to start with a new top three who have similar views."

In Europe, the services sectors of Germany, Spain and the Eurozone as a whole all saw better-than-expected improvements in conditions last month, according to monthly purchasing managers' index data published this morning, although the PMIs for Spain and the Eurozone remained below 50, indicating sector contraction.

Italy's services PMI by contrast was lower than the consensus forecast among analysts, and down on the month earlier, indicating a sharper rate of contraction during the month.

In the UK, January's services PMI was 51.5, up from 48.9 a month earlier.

"A huge sigh of relief accompanies these numbers, as a return to growth of the service sector in January greatly reduces the likelihood of the UK falling back into a 'triple-dip' recession," says Chris Williamson, chief economist at Markit, which produces the PMI.

Both the Euro and Sterling rallied against the Dollar this morning, although Sterling reversed most of the move by lunchtime. Both currencies remain below where they started the month.

Ben Traynor

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Wednesday, January 9, 2013

Gold Market Report 8 January

Dealers Report "Very Strong" Gold Demand from China, Indian Interest "Significant"

WHOLESALE gold bullion prices ended Tuesday morning in London at $1655 per ounce, regaining ground lost yesterday to climb back to where it started the week, with dealers reporting signs of strong demand from India and China, the world's two biggest gold buying nations.

Silver climbed to $30.40 an ounce, slightly up on the week so far, while stocks and commodities also edged higher and US Treasuries fell.

The Shanghai Gold Exchange Monday reported record trading volumes equivalent to 19.5 tonnes for its Au9999 contract, which represents gold bullion of 99.99% purity. Tuesday's Au9999 volume fell to just under 9.3 tonnes, still significantly above the last year's daily average.

"Physical [gold] demand is very strong," one Beijing trader told newswire Reuters this morning.

"It's a combination of the attraction of lower prices as well as pre-holiday demand."

China celebrates Lunar New Year on 10 February this year.

Official customs data from Hong Kong meantime shows China imported 90.7 tonnes of gold from Hong Kong in November, a 91% increase from the previous month. The volume of gold flowing the other way rose 23% to 27.7 tonnes. Hong Kong is widely regarded as the major conduit for Chinese precious metals imports.

Premiums on gold bullion shipments to India hit a two-month high Tuesday, with dealers blaming a rush to buy gold before an expected import duty hike.

Gold shipped to India traded between $2 and $3 an ounce above London prices, dealers reported.

By comparison, premiums in Singapore this morning were around $1-$1.20 an ounce.

"Our physical desk has already noted significant interest from Indian clients looking for gold, which could push up imports until the tax in announced," says a note from Nick Trevethan, senior commodity strategist at ANZ.

"Nothing is available readily," adds one dealer at a bullion importing bank in Mumbai, adding that some shipments are taking up to a week to arrive.

Western investors  meantime continued to add to their gold positions in December, according to data from BullionVault.

The Gold Investor Index, which tracks buying and selling on the world's largest online precious metals exchange, rose to a 12-month high in December.

Over in Japan, investment by pension funds in gold exchange traded funds could more than double over the next two years, according to Itsuo Toshima, pension fund advisor  and former regional director Japan/Korea at the World Gold Council.

"Bullion's role as an inflation hedge, long ignored by Japanese fund operators, has come under the spotlight thanks to [Japan's prime minister Shinzo] Abe's economic policy," said Toshima Tuesday.

Following his election victory last month, Abe said the Bank of Japan should adopt a 2% inflation target, double the current targeted level, having previously called for unlimited quantitative easing during the election campaign.

"Gold may be a standard asset-class in the portfolio of Japanese pension funds as Abe's target is realized," said Toshima.

Over in Europe, the Eurozone unemployment rate rose to a record 11.8% last month, figures published Tuesday show. Spain had the highest unemployment rate of any Euro member at 26.6%, while Austria's rate was the lowest at 4.5%.

"The Eurozone needs easier monetary policy," says Standard Bank currency analyst Steve Barrow.

"This can happen through lower policy rates...[as well as] the activation of the [European Central Bank's] Outright Monetary Transactions program, although the ECB would claim that this is not equivalent to monetary easing."

The OMT program, announced last September, would see the ECB commit to buy sovereign bonds in whatever quantity needed to prevent borrowing costs rising too far above those of other Euro members. A condition of the OMT is that a beneficiary government has accepted a bailout program and its attached conditions.

"A move to negative deposit rates [also] seems very possible in our view," adds Barrow, "and we would not even rule out the possibility that the ECB will have to undertake quantitative easing of its own."

The ECB announces its latest policy decisions this Thursday.

Deutsche Bank meantime cut its average gold price forecasts for 2013 and 2014 Tuesday.

Deutsche's 2013 forecast is down 12.1% to $1856 an ounce, while next year's forecast is down 5% to $1900 an ounce.

"The whole debt situation remains a major challenge, and accommodative monetary policy is very much seen as a way to minimize the negative repercussions of that," says Daniel Brebner, the bank's head of metals research.

"So I don't believe the gold story is over, but certainly, the market is likely to continue to pause."

Shares in London-listed African Barrick Gold meantime fell 20%this morning after the state-owned China National Gold ended talks to buy the 74% stake in African Barrick owned by parent Barrick Gold. 

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Thursday, January 3, 2013

Gold Market Report 3 January

Gold, Silver Tick Lower as "Euphoria" of Fiscal Cliff Deal Fades, India Proposes Policies to Reduce Gold Imports

WHOLESALE gold bullion prices drifted lower to $1680 an ounce by the end of Thursday morning in London, having rallied to a two-week high yesterday following news of the deal to avert the so-called fiscal cliff in the US.

"Precious metals, including gold, [were] able to profit from the euphoria among market players in the wake of the compromise reached in the US budgetary dispute," says today's commodities note from Commerzbank.

Silver also ticked lower this morning, dropping back below $31 an ounce, while other commodities also dipped and the US Dollar gained.

India's central bank meantime has announced a series of policy proposals aimed at curbing Indian gold imports.

After yesterday's rally in stocks, European indexes eased lower Thursday morning.

US president Barack Obama yesterday signed into law the bill to avoid the so-called fiscal cliff of spending cuts and tax cut expiries, after it was approved by the House of Representatives on New Year's Day.

"We see yesterday's jump in risk assets as a one-off response to the US budget vote and expect consolidation today," said a note from Credit Agricole this morning.

The fiscal cliff deal postponed planned spending cuts for two months, meaning these will still need to be debated, as will the issue of raising the government's $16.4 trillion debt ceiling.

"The fact that Congress has left so many key items up in the air will likely provide a measure of support for gold," reckons Ed Meir, metals analyst at brokerage INTL FCStone.

"It reinforces the general notion – now evident practically the world over – that politicians are losing control of their monetary base. This only makes the case for owning gold as an alternative 'shadow' currency all the more stronger."

"Central bankers everywhere continue to debase their currencies and the financial markets prove treacherous," adds Byron Wien, chairman of Blackstone Group, writing in his annual '10 Surprises' list, which predicts gold will reach $1900 an ounce.

Over in India, traditionally the world's biggest gold buyer, the central bank has published a draft report from its Working Group on gold, set up to examine the impact of gold imports on India's economy.

"Large gold imports are adversely impacting the current account deficit," says the report from the Reserve Bank of India's Working Group.

"There is a need to moderate the demand for gold imports."

Among the Working Group's suggestions is raising the loan-to-value limit for gold loan companies from 60%, which the RBI brought in last year, to 75%. Shares in gold loan companies Muthoot and Manappuram rallied earlier today following the report's publications.

Other policies suggested by the report include encouraging people to invest in gold-backed financial instruments rather than buy gold itself, as well as "fiscal measures" to reduce gold imports. 

On Wednesday, India's finance minister said the government is considering raising the import duty on gold bullion.

"Fiscal initiatives may be appropriate, but they have to be implemented very carefully," said C Rangarajan, economic advisor to India's prime minister, in an interview with Indian television Thursday.

"We need to calibrate it in such a way that it does not result in an increase in the smuggling of gold... part of the reason for the high level of imports is the high level of inflation...if inflation rates start coming down, I expect gold imports to also come down."

Indian gold dealers and jewelers meantime expect gold demand to rise by up to 15% in the first quarter of 2013 compared to the final three months of last year, the Economic Times reports.

"Farmers are expecting better [harvest] returns this year," says Bachhraj Bamalwa, chairman of the All-India Gem & Jewellery Trade Federation.

"Moreover, the wedding season will be in full swing from January. This will give a fillip to rural demand." 

Ben Traynor

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Tuesday, October 23, 2012

Gold Market Report – 23 October

"Pause in Monetary Policy" sees Gold Drop Below $1710, Germany's Central Bank Told to Inspect Overseas Bullion

WHOLESALE PRICES for gold bullion dropped below $1710 an ounce ahead of Tuesday's US session, its lowest level in over six weeks, as stocks and commodities also fell and the Dollar rallied, with two weeks to go until the US presidential election.

Silver bullion fell through $32 an ounce to hits its lowest level since the first week of September.

"You've had QE priced in and what we're seeing now is a bit of a retracement following that," says Daniel Brebner, analyst at Deutsche Bank, referring to last month's Federal Reserve announcement of open-ended quantitative easing.

"We have a pause in monetary policy action – it's very unlikely we're going to see anything in the U.S. and China while there is political transition."

US voters go to the polls in a fortnight, while next month also sees a change of Chinese leadership.

The Federal Open Market Committee today begins its latest two-day policy meeting, which will be followed by a decision tomorrow.

Over in Germany, federal auditors said yesterday that the Bundesbank should regularly inspect its reserves of gold bullion held at the central banks of the US, UK and France. Press reports suggest the central bank may begin shipping gold held at the New York Fed back to Germany for inspection.

Elsewhere in Europe, stock markets sold off Tuesday morning for the third day in a row, with Germany's DAX down 1.3% on the day by lunchtime.

In Luxembourg, the European Union Court of Justice is today due to hear a complaint against 

The Eurozone's €500 billion bailout fund the European Stability Mechanism "is at odds with and undermines [European] legal order," the lawyer for Irish politician Thomas Pringle told the European Union Court of Justice Tuesday.

Pringle argues that the ESM violates EU laws against bailing out single currency members. The ESM, which was set up to replace the temporary European Financial Stability Facility, became operational earlier this month after a preliminary ruling by Germany's Constitutional Court in September that its creation did not breach German law.

Billionaire investor Wilbur Ross, who has previously bought stakes in Bank of Ireland and Northern Rock, is in talks about buying Spanish banking assets, Bloomberg reports.

The volume of gold held to back the world's largest gold ETF, SPDR Gold Shares (GLD), rose by 2.7 tonnes yesterday to 1336.9 tonnes, within 3% of the all-time high hit earlier this month.

Ben Traynor

BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Tuesday, September 25, 2012

Gold Market Report - 25 September

Gold ETFs Set New Record, Bullion Prices "Should Break Higher After Consolidation Period"

SPOT MARKET gold bullion prices traded around $1765 an ounce Tuesday morning in London, 1.8% off last Friday's seven-month high.

"It looks to me like we've got a short period of consolidation," says Standard Chartered analyst Daniel Smith.

"[We'll see] maybe a month of sideways trading possibly and then generally trending higher in the next six months to a year."

Stock markets were also broadly flat as major government bond prices gained, while the Euro recovered early losses ahead of a meeting between the leaders of Germany and the European Central Bank.

Tuesday also brought fresh news of central bank gold buying, while SPDR Gold Shares (GLD), the world's biggest gold ETF, saw its gold bullion holdings hit a new record Monday at 1326.8 tonnes.

Overall gold ETF holdings tracked by newswire Reuters also hit a new record at 2294.3 tonnes.

Silver bullion held by the world's biggest silver ETF, iShares Silver Trust (SLV), rose to just under 10016 tonnes yesterday, their highest level since September 2011.

"We still prefer to be buying gold on dips and believe the break higher will eventually come," says Walter de Wet, commodity strategist at Standard Bank.

"But the futures market needs to lose some speculative length and the physical market needs to adjust to a higher price-range first."

The aggregate positioning of Comex gold futures and options traders rose to its highest reported level since February last week, according to weekly data published by the Commodity Futures Trading Commission. October gold option contracts on the Comex expire later today.

On the supply side, London-listed pawnbroker Albermarle & Bond has announced a reduction in new store openings in the next financial year, citing a "sudden slowdown" in profit growth from buying and recycling scrap gold.

"We expect gold buying to continue to be a significant profit contributor...albeit at much reduced levels to that achieved at the peak," chief executive Barry Stevenson said.

The firm plans to open five stores in the next financial year, compared to 25 opened in 2011-12.

Silver prices meantime climbed to $34.31 an ounce – 2.6% off last week's high – while other industrial commodities also ticked higher.

"Silver is still within the recent range and we feel it is too early to call a reversal," says the latest technical analysis from bullion bank Scotia Mocatta.

Over in Europe, German chancellor Angela Merkel and European Central Bank president Mario Draghi are due to meet today in Berlin, where they are expected to discuss the Eurozone crisis.

Spain's deputy prime minister meantime has said she wants to see more details of the ECB's unlimited sovereign bond buying program announced earlier this month.

"We need to know to what extent the ECB will intervene in the secondary market," Soraya Saenz de Santamaria said Tuesday.

"To take decisions you need to have all the elements on the table."

Spain sold €4 billion of 3-Month and 6-Month bills at auction this morning, with borrowing costs ticking higher from a month earlier. 

Italy meantime sold €3.94 billion of 2-Year debt, compared with a maximum target of €4 billion.

Elsewhere in Europe, Switzerland's central bank bought an estimated €80 billion of so-called core Eurozone sovereign debt in the first seven months of the year, according to a report published Tuesday ratings agency Standard & Poor's.

"In our view, this has significantly contributed to the declining yields on bonds issued by the core sovereigns," the report says.

Yields on 6-Month German Bubills have spent much of the year in negative territory, while 10-Year Bund yields have at times traded at less than 1.2%. By contrasts, Spain's 10-Year government bond yields spiked above 7.7% in July.

Last year, the Swiss National Bank announced it was placing a floor under the Euro's exchange rate with the Swiss Franc and would not allow it fall below SFr1.20. The SNB pledge "unlimited" currency purchases to support this peg.

The central banks of South Korea, Paraguay and Ukraine meantime all added to their gold reserves over the last two months, according to International Monetary Fund data published Tuesday.

Korea added nearly 16 tonnes of gold bullion in July, taking total reserves above 70 tonnes, while Paraguay's holdings rose by 7.5 tonnes to 8.2 tonnes in the same month. Ukraine added just under 1.9 tonnes in August, taking official reserves to 34.8 tonnes.

Venezuela, which repatriated most of its gold last year, cut its holdings by 3.7 tonnes, taking the total to 362 tonnes.

Turkey's central bank also reported a rise of 6.6 tonnes, although Turkey's gold holdings include gold held with the central bank by commercial institutions as part of their reserve requirements. 

China's central bank injected a record 290 billion Yuan into financial markets Tuesday, ahead of a week-long public holiday next week.

Ben Traynor

BullionVault

Gold value calculator | Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Friday, September 21, 2012

Gold Market Report - 21 September

"Gold Uptrend Intact" as Bullion Sentiment "Buoyed by Inflation Fears"

WHOLESALE gold bullion prices held above $1770 an ounce Friday morning in London, a few Dollars below six-month highs hit earlier in the week, while stocks and commodities were also broadly flat ahead of a meeting between the leaders of Spain and Italy, with press reports suggesting plans are being discussed for a Spanish bailout.

Heading into the weekend, spot gold would make its fifth straight weekly gain if it closes above $1770 per ounce later today, while gold in Euros remained within 1% of last year's all-time high this morning.

"The large uptrend is still intact, and it is positive that gold has been able to hold onto recent gains," says the latest technical analysis note from bullion bank Scotia Mocatta.

"The long-term inflation outlook...is keeping gold sentiment buoyed," says one trader in Shanghai, referring to last week's Federal Reserve decision to begin open-ended quantitative easing.

Gold bullion holdings to back the world's biggest gold ETF SPDR Gold Shares (GLD) rose to a new 13-month high of 1308.4 tonnes yesterday.

Deutsche Bank Asset Management meantime reports growing interest in gold among its clients, who are "increasingly concerned" about inflation risks.

Silver bullion meantime fell to $34.63 an ounce this morning – slightly below last week's close.

The world's biggest silver ETF, iShare Silver Trust (SLV) saw its holdings hit a new 11-month high yesterday at over 9940 tonnes.

Chinese silver imports rose 304 tonnes last month, up nearly 12% from a month earlier but down 3.4% year-on-year, official Chinese customs data show.

"We still believe that domestic stockpiles [of silver in China] are extremely large when compared to the lackluster fabrication demand," says a note from Standard Bank, whose analysts highlighted the problem of Chinese silver stockpiles back in February.

"We do not expect Chinese fabrication demand for silver to improve any time soon."

European Union officials are in talks with Spain's government over conditions that might be imposed should Spain ask for a bailout, the Financial Times reports

"It is a kind of 'proto-program', if such were needed," an EU official told the FT.

Spanish leaders are considering a freeze on pension payments and a sooner-than-anticipated raising of the retirement age in a bid to save an annual €4 billion, according to newswire Reuters.

A condition of the European Central Bank's new Outright Monetary Transactions program – which would see the ECB buy sovereign debt on the open market to reduce borrowing costs – is that beneficiary nations must already be in a bailout program and must be fulfilling agreed conditions such as meeting deficit targets.

Spain has already agreed to borrow up to €100 billion to fund the restructuring of its banking sector.

An independent stress test of Spanish banks is expected to show that between €50 billion and €60 billion will be needed, Reuters reports, raising the prospect that Spain could seek to use the remainder to fund the government and stave off the need for a formal sovereign bailout.

Spanish prime minister Mariano Rajoy is due to meet with Italian prime minister Mario Monti in Rome around lunchtime. Both countries saw their borrowing costs rise sharply in the summer, with benchmark 10-Year yields on Spanish government debt hitting new Euro-era highs in July.

Like Rajoy, Monti is reported to be reluctant to request a sovereign bailout.

"There won't be any nation that voluntarily, with a preemptive move, even if rationally justified, would go to an international body and say: ‘I give up my national sovereignty'," said Italian undersecretary of finance Gianfranco Polillo last night.

"I rule it out for Italy and for any other country."

Here in the UK, the government's deficit was smaller than expected last month, official figures published Friday show. 

Investment managers holding UK government bonds meantime have said the British government can relax its austerity measures, according to a report by Bloomberg.

"Now that growth has continued to disappoint, there is a good case for higher spending in public-sector investment," says Michael Amey, London-based portfolio manager at world's biggest bond fund Pimco.

"Every government has to cut spending, but too many cuts may slow the economy," agrees Yoshiyuki Suzuki, head of fixed income at Fukoku Mutual Life Insurance in Tokyo.

In Vietnam meantime, the central bank-owned Saigon Jewelry Company began processing and rebranding the gold bars of other refiners yesterday, after the central bank handed it a monopoly on gold bullion production earlier this year.

AngloGold, the world's third-largest gold bullion producer, became the latest gold mining firm in South Africa to be hit by strike action late Thursday. 

"The night shift embarked on an unprotected strike at Kopanang and the morning shift didn't go down either," said AngloGold spokesman Alan Fine.

The strike follows a series of stoppages that have hit platinum and gold mining operations in South Africa. These include protests at mines operated by Gold Fields and demonstrations at Lonmin's Marikana platinum mine in which 46 people have dies, including 34 shot dead by police in one incident.

"Both workers and government are seeking a greater share of the returns from mining, just as the mines themselves become more costly to run due to falling ore grades and rising energy costs," says the weekly commodities note from French investment bank Natixis.

World number one producer Barrick Gold meantime closed its Pierina mine in Peru for one day Thursday, after one person dies and four were injured in clashes between police and nearby villagers. 

Ben Traynor

BullionVault

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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault's weekly gold market summary on YouTube and can be found on Google+

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