Posts Tagged ‘adrian ash’
Gold Tests $1500, Silver Extends Worst Plunge in 24 Years, But Ultra-Low Interest Rates “Really Favor Precious Metals”
By: Adrian Ash, BullionVault
London Gold Market Report
PRICES in LONDON’s wholesale spot gold market briefly dipped beneath $1500 per ounce the first time in a week on Thursday in London, bouncing to $1509 – and recovering faster vs. the Euro and Sterling – as both the UK and Eurozone central banks held their interest rates unchanged, significantly below the rate of inflation.
The Euro lost 1¢ to the Dollar on the news, helping the gold price in Euros reverse one-third of this week’s 4.4% drop.
Spot gold priced in Sterling rose to £916 per ounce, less than 3% off Monday morning’s sudden spike a record high above £940.
“The underlying pace of monetary expansion remains moderate,” said ECB president Jean-Claude Trichet today, failing to repeat April’s 0.25% hike.
“We have solid anchoring of inflation expectations.”
“The [Bank of England] may not do anything until November,” reckons former central-bank official David Tinsley at National Australia Bank in London, quoted by Bloomberg.
“The risks are potentially that they may be on hold for longer than that.”
Trading 5% below Monday’s short-lived spike to record highs above $1576, the spot gold price had earlier slipped on Thursday morning as Asian and European stock markets extended Wednesday’s fall, taking the FTSE100 here in London down to a two-week low.
Commodity prices fell once again meantime, and silver bullion sank for the fourth day in succession, losing 22.5% against the Dollar since Thursday last week – the sharpest plunge since April 1987.
“If [other] commodities go down by 20%, we expect it to be short-lived,” said Walter de Wet of Standard Bank to Bloomberg in London on Wednesday.
“Because this is not the end of the commodities boom, and we’re not at the end of the cycle.
“Monetary policy in general still remains very, very accommodative and real interest rates very low, even in countries like China, where inflation is much higher than the deposit rate.
“That really favors precious metals,” said de Wet to the newswire.
Over in Asia on Thursday, where the Tokyo stock and futures exchanges remained closed for the Golden Week holiday, “the level of activity is even less than yesterday,” one Hong Kong spot gold dealer, noting that “exchanges around the world have been rolling out various measures to control their operational risk” in the face of huge volatility.
From Monday next week, the Shanghai Gold Exchange will raise the initial margin paid on new positions in its popular gold and silver futures to 18% of contract value.
A futher hike in margin requirements by the United States’ CME will see speculators in US silver futures charged $21,600 per contract – up by 84% from a fortnight ago.
“Silver investors dump futures as Comex boosts speculator trading costs,” says a headline at Bloomberg.
Yet the total number of outstanding silver contracts now open, however, has actually risen over the last week, swelling by 6.2% from Thurs 28 April.
Daily trading volume has gone the other way, standing one-fifth lower on Wednesday from a week before.
“India is already set to double its [private] silver purchases to 1,500 tonnes this year,” reckons Mumbai analyst Harminder Baweja, quoted by MineWeb.
“There are reports that [corporate] reserve managers in China are [also] using gold to diversify their exposure to the Dollar. All these point to higher imports in both the countries.”
Here in London, the volume of silver bullion held in trust at J.P.Morgan’s vaults for shareholders in the New York-listed iShares ETF fell again on Wednesday, shrinking by more than 12% from this time a month ago to 10,387 tonnes.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Silver Plunge Flirts with 20% Bear Market, “Gold Favored” as Mexico Buys 93 Tonnes
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD held tight as silver prices sank once again in London on Wednesday morning, sitting above last night’s two-session low of $1528 per ounce while silver dropped to new 3-week lows, flirting with the technical definition of “bear market”.
New data showed the Bank of Mexico buying 93 tonnes of gold bullion for its reserves in Feb. and March, the heaviest central-bank buying since India’s 200-tonne purchase from the IMF in Oct. 2009.
Brent crude oil meantime stabilized at $122 per barrel, but broader commodity indices fell together with Asian and European stock markets.
Major-economy government bonds also fell – driving US Treasury yields higher from a 6-week low – as S&P called a UK rate rise “almost certain” over the next 3 months.
The European Central Bank “could be more hawkish” again tomorrow, reckons fixed-income strategist Patrick Jacq at BNP Paribas, perhaps flagging up another 0.25% rate-rise for June.
“A reversal of 20% or more, returning [silver prices] to levels in the mid-$30s, would not surprise us at all,” says UBS metals strategist Edel Tully in London.
“We remain significantly more friendly to gold than to silver.”
From last week’s new 31-year and all-time record highs, silver today bottomed some 18.6% vs. the Dollar and Sterling respectively.
Priced in the Euro, silver bullion traded more than 20% below last Monday’s high, meeting the technical definition of a bear market.
Commenting on Mexico buying gold, “There’s an appetite now among emerging economies with large forex reserves to add to their gold reserves,” the FT quotes Mitsubishi precious metals strategist Matthew Turner.
“Gold is seen as one way in which to diversify away from the Dollar- or Euro-denominated assets.”
The Euro today traded back up to the 17-month high of $1.4880 first hit a week ago, as Portugal secured a €78 billion line of credit from its European Union partners.
Smaller than first proposed, the bail-out is still pending ratification by the Lisbon parliament after next month’s general election.
New data meantime showed Eurozone retail sales shrinking unexpectedly in March. UK money-supply growth and new mortgage approvals both lagged analyst forecasts.
The Pound also rose vs. the Dollar, recovering one-third of Tuesday’s 2¢ drop but failing to push the gold price in Sterling much below £930 an ounce – a new all-time high when first reached on Friday.
Doubling inside 6 months, however, “No asset in history has risen so sharply so rapidly [as silver prices] and retained most of its price appreciation,” says New York’s CPM Group metals consultancy.
“A sharp retracement [to $37 per ounce] seems more likely than not at this point.”
“Others may choose to trade here and may enjoy the violent random nature of the [silver investment] market,” says Dennis Gartman of the eponymous $5,000-per-year advisory letter, also quoted by the Wall Street Journal.
“We, as always, shall avoid it. Betting on the red in Vegas is far, far safer.”
George Soros’ flagship hedge fund has apparently quit its sizeable gold and silver positions, the Journal reports.
Previously controlling the 7th largest position in No.1 exchange-traded gold trust the SPDR Gold fund, manager of Soros’ $28 billion portfolio Keith Anderson now sees a lower risk of deflation and thus a lower risk of government inflation in response, according to the newspaper.
Hedge fund manager John Paulson – whose funds hold the largest single position in the New York-listed gold ETF – yesterday confirmed his bullishness on gold, and told a group of investors that the metal’s price could reach $4000 per ounce.
“Wexford Capital, a $6.5 billion fund that has been a large buyer of silver over the past year, retains much of its metal positions, according to someone close to the matter,” says the WSJ.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Gold Rises as US Rates Set to Stay “Exceptionally Low”, Silver Falls in “Post-Fireworks” Trade
By: Adrian Ash, BullionVault
London Gold Market Report
THE WHOLESALE MARKET price to buy gold rose but silver held flat in Asian and London trade on Wednesday, as the Dollar fell, European equities rose, but “peripheral” Eurozone debt sank again, driving credit-default insurance costs up to new record levels.
Crude oil and natural gas prices bucked a drop in the broad commodities market.
US government bonds ticked lower, nudging yields higher, ahead of today’s Federal Reserve interest-rate decision.
“[Although] the Fed is unlikely to embark on further quantitative easing…real interest rates remain exceptionally low and government borrowing high – two factors core to our bullish view on gold.
says the daily note from Standard Bank’s team in London.
“Short term however we would not be surprised to see gold dip lower.”
For the second day running, gold recorded a higher London Fix on Wednesday morning than the previous PM Fix, while silver recorded a drop.
Since the start of 1968, the two metals have moved in the same direction on 69% of all London trading days.
Only once has gold risen but silver fallen for 3 days running, back in May 2003.
“[Precious metals are] basically a struggle between those who think the uptrend has resumed and those who think the retracement is not yet finished yet,” says one Hong Kong dealer in a note, calling Wednesday’s Asian gold and silver trading “quite subdued” compared with the “fireworks” seen since Good Friday.
“Silver’s outperformance is taking a short term breather,” reckons Axel Rudolph in his latest Technical Analysis Research for Commerzbank clients.
“We anticipate a recovery towards the $50 mark in the course of this week.”
Stating that Tuesday’s New York close “confirmed [Monday's] sell signal” for both gold and silver, “the Gold/Silver Ratio has shot higher,” notes the latest technical analysis from Scotia Mocatta.
Falling to a 28-year low at 32.5 last week, the ratio of gold prices to silver prices rose to 33.3 in London trade on Wednesday morning.
“It’s consolidation,” Reuters quotes Matthew Turner at Japanese metals conglomerate Mitsubishi.
“Gold has done a bit better than silver over the last couple of days, but we’re still in a holiday period here in London so trading volumes are not as high as normal and I don’t think there will be a huge move.”
The lethargy in Wednesday’s Asian and London markets contrasts with exchange-traded dealing in New York silver, according to a report in the Wall Street Journal.
“Volume in the silver ETF on Monday reached a record 189 million shares, compared with an unusually low 65 million for the SPDR [Gold Trust ETF],” says the WSJ.
“Trading in the silver ETF was five times that of the 37 million daily average of the first quarter, and blew past its previous daily peak of 149 million shares set in early November.”
Gold futures trading has also lagged a sharp rise in silver-contract volumes, says the Journal. Daily volume in silver futures has more than tripled so far this month compared with April 2010.
“Total outstanding contracts in the silver-options market also reached a record on Monday.”
Monday also saw the iShares SLV Silver ETF hit a new record holding of 11,390 tonnes, before slipping back 1.7% by last night’s close.
Here in London today, the GBS gold ETF announced only its fifth increase in bullion holdings for 2011 to date, with an additional half-tonne of gold swelling the trust’s total to a two-month high of 115 tonnes.
“There are risks in being out of markets as well as in them,” says The Daily Telegraph’s personal finance editor Ian Cowie on his blog, “and today’s bullion bears must bitterly regret calling the top of this bull run all the way up.”
Over in the forex market ahead of the Fed’s announcement on Wednesday – expected to leave both rates and the latest $600bn tranche of quantitative easing unchanged – the Euro and British Pound both touched new 16-month highs vs. the Dollar.
European investors looking to buy gold saw the price little changed from last week’s finish. Euro and Sterling Silver prices traded more than 4% lower.
New data meantime pegged UK economic growth at 0.5% during the first quarter, in line with analyst predictions. So too was this month’s German price inflation, rising to 2.4% year on year.
New Eurozone industrial orders missed consensus forecasts for Feb.
Adrian Ash
(c) BullionVault 2011
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.
Gold Speculation Called “Routine” as Crude Oil Rises, US Ranked 4th Riskiest Sovereign Debtor
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD reversed an overnight dip beneath $1500 per ounce in London on Tuesday morning, trading within 1% of Monday’s new record high at $1518 as European stock markets rose together with major government bonds and energy prices.
Following yesterday’s dramatic Asian trade and greater-than-7% price range, “Silver showed further weakness” according to one Hong Kong dealer, “stretching [his] expectation about how volatile it could be.”
At today’s London Fix – set at $45.48 per ounce – the price of silver bullion had only been higher on four days in history, three of them amid the Hunt Brothers’ Corner of Jan. 1980, and the other being Thursday last week.
“Despite silver setting new nominal record highs in the past week, the Comex net long position [in silver futures contracts] is far from record levels,” says the latest Precious Metals Weekly for ABN Amro from the VM Group in London, “implying that [London-centered] physical trade is driving the price.”
Friday and Monday’s Bank Holidays in the US and UK meant “markets had a chance to go wild on thin volumes,” says one London dealer, but after surging to new record highs gold settled last night at $1510 per ounce – the first drop in 8 trading days, as Russell Browne at Scotia Mocatta notes.
Silver saw a “long legged Doji” chart pattern, Browne adds, “warning of a possible reversal” by touching new highs intra-day but falling back to end the session unchanged.
“There is some good, old-fashioned…[and] routine speculation…in the few commodities that can be stored, like gold,” writes Jeremy Grantham, co-founder and chief investment strategist of the $107 billion GMO asset manager, in his latest letter to clients.
“[But] I believe this is a small part of the total pressure on [raw material] prices, and the same goes for low interest rates. [Instead] we have gone through a profound paradigm shift in almost all commodities, caused by a permanent shift in the underlying fundamentals” as limited supply meets vastly increased demand from Asia’s fast-emerging economies.
“Statistically,” says Grantham, “most commodities are now so far away from their former downward trend that it makes it very probable that the old trend [of steadily falling input prices] has changed.
“[This is ] perhaps the most important economic event since the Industrial Revolution.”
Monday saw shares in Barrick – the world’s largest listed gold mining stock – lose 5% after it successfully bid 14 times last year’s earnings at take-over target Equinox, a copper miner.
Asian investors also sold Chinese loser Minmetals, however, driving it 12% lower in Hong Kong, after it said “the price offered by Barrick is above our most optimistic assessment of value… [and] would, in our view, be value destructive for [our] shareholders.”
Over in Venezuela, meantime, 20 armed robbers broke into, seized control of, but failed to steal any gold from the El Callao facilities of Russian gold mining firm Rusoro.
“They did get into the storage area but they were unable to open the armored security safes” before fleeing the scene, Rusoro’s local security chief told Globovision TV.
In the credit markets, a new report from Deutsche Bank ranks the US government as the world’s fourth riskiest sovereign borrower, behind Greece, Ireland and Portugal, and just ahead of Italy.
Here in London on Tuesday, UBS’s City office asked the decisions committee of the International Swaps & Derivatives Association to say whether the Irish government’s new Credit Institutions Act signals a “restructuring credit event” for Anglo Irish Bank.
The Act orders AIB to buy back certain “subordinated liabilities” from bondholders, potentially triggering bets against the bank’s debt known as credit default swaps.
Yields offered to new buyers of Irish, Greek and Portuguese debt all rose to new post-Euro records on Tuesday morning, as prices continued to fall.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Shift to Physical Accelerates as Gold Rises in Dollars Only, Silver Adds 7.7% for the Week
By: Adrian Ash, BullionVault
London Gold Market Report
THE WHOLESALE PRICE of gold broke fresh US Dollar highs ahead of the long Easter weekend in London on Thursday, but fell against all other major currencies, unwinding this week’s sharp gains entirely for Euro buyers.
The price of gold in British Pounds slipped 1.4% from yesterday’s new all-time highs.
Silver prices extended their Dollar gains to 7.7% for this week alone, breaching $46 per ounce and also reaching new multi-decade and all-time highs vs. the world’s other major currencies.
Goldman Sachs yesterday raised its margin requirements for clients wanting to sell the SLV iShares Silver ETF short to a three full percentage points.
Bullion bank Scotia Mocatta on Wednesday adjusted its “registered” and “eligible” stockpiles at Comex depositories, holding back more than $225m of bullion from being deliverable against futures contracts in a fully client-owned position.
London-listed GBS – the UK’s first exchange-traded gold ETF – today reported its fifth redemption of shares in exchange for physical bullion in as many weeks.
“One unidentified company has the potential to own up to 89% of the lead in warehouses monitored by the London Metal Exchange,” Bloomberg reports, “a position worth $704 million at the current price.”
China’s state-owned Sinopec oil giant meantime suspended all exports of refined oil products, according to the state-run Xinhua news agency, aiming to “to maintain domestic market supplies of refined oil products”.
“Rather than continuously roll the futures contracts, it just became easier and more economical for us to take…the bullion,” said University of Texas investment officer Bruce Zimmerman to CNBC on Wednesday, explaining the US’s second-largest academic fund’s decision to switch from gold futures to a fully allocated gold position.
“The role gold plays in our portfolio is as a hedge against currencies,” Zimmerman said, noting UTIMCO’s large fixed-income exposure.
“The concern is that we have excessive monetary and fiscal stimulus.”
The Euro today hit a new 16-month high vs. the Dollar at almost $1.4650, while world stock markets rose together with major-government bond prices.
US crude oil ticked above $112 per barrel.
“The key element determining gold’s near-term direction right now is the US Dollar,” Bloomberg quotes Edel Tully at Swiss banking giant UBS’s London office.
“[But] sovereign debt concerns in US and Europe, along with inflation fears, provide a good backdrop for gold.”
The International Monetary Fund said yesterday that the global banking sector faces a “wall of maturing debt” totaling $3.6 trillion in the next two years.
Last week it said that developed-world governments have to raise 27%-worth of their annual economic output from the bond markets in 2011, “heightening competition for scarce funding resources.”
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Gold Slips, “Huge Speculation” Makes Asian Silver Market “Dysfunctional” as China’s FX Reserves Top $3 Trillion
By: Adrian Ash, BullionVault
London Gold Market Report
LONDON’S WHOLESALE-MARKET price for gold fell against a rising US Dollar in London on Thursday, dropping back to $1454 per ounce but rising for Euro and Sterling buyers as world stock markets fell alongside commodities.
Major-economy government bond price rose, nudging 10-year US Treasury yields down to 3.44%.
The price to buy silver also fell back Thursday morning, dropping 2.0% after coming within 50c of Monday’s new 31-year highs.
“The interbank silver market [in Asia] is dysfunctional” says one Hong Kong dealer’s note. “Liquidity is getting worse while the price action is getting more exaggerated as a result.”
With ever-more money looking to buy silver, “The furiousness of such moves has been increasing in the past two weeks…[and] the flow in/out of silver is excessive with respect to the capacity of the market.”
Speaking to BullionVault from Chennai about India’s current retail demand to buy silver, “People believe the rumors that silver is going ballistic even from this level,” says Daman Prakash Rathod of MNC Bullion. “[There's] huge speculation here as people have money to invest in physical buying.”
Having earlier heard clients identify the equivalent of $42 per ounce as a key profit target, “On the contrary, $42 silver revived the frenzy of buying.
“It’s a bit calmer now after seeing the correction to $40.”
“The type of demand for silver that we have experienced in the last few months has never been seen before,” says Prithviraj Kothari, president of the Bombay Bullion Association, to the Financial Times.
“Demand has gone up 25% compared to a year ago as people are going crazy for silver because they think it will give them better returns than gold.”
The late-April festival of Akshaya Thrithiya marks the third most auspicious day in the Hindu calendar, and is typically seen as an auspicious time to buy silver and Gold.
“Gold could be supported by some buying interest from Asian countries,” reckons Ong Yi Ling in Singapore Phillip Futures, speaking to Bloomberg.
“Amid high inflation and a lack of investment alternatives, gold could be sought out as a store of value and hedge against inflation.”
The GFMS precious-metals consultancy yesterday said the gold price could easily hit $1600 in 2011, and that the market has most likely “already seen the lows” for the year at $1319 per ounce.
Analysts at French investment bank BNP Paribas this week revised their silver price forecast for 2011, predicting an average of $41.40 an ounce – nearly $6 per ounce above their March 10th forecast – thanks to “both the fabrication and investment sectors.
Thanks to such strong demand to buy silver, “it may end up being the top performer of the precious-metals complex in 2011,” says BNP. The bank warns that future rises in US interest rates may be discounted early by the market, however, “bringing a correction in silver prices earlier than assumed in our forecast.”
New US data on Thursday showed a sharp rise in Initial Jobless Claims but a fall in Continuing Claims.
Factory input prices rose less quickly than analysts feared, but Producer Price Inflation still accelerated to a 12-month high of 5.8%.
New data from China – now the world’s No.2 gold consumer market – meantime showed a surprise jump in bank lending, up by 26% in March from Feb.
Beijing’s central-bank currency reserves surged through the $3 trillion level, the State Administration of Foreign Exchange said.
On the latest official data, its 1054 tonnes of gold bullion reserves fell to just 1.6% of total holdings.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Gold & Silver Hold Near Record Highs as ECB Hikes, Portugal Requests Bail-Out, Real Rates Remain “Dangerously” Negative
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE of gold investment bullion held near Wednesday’s new all-time Dollar highs in London trade this morning, rising toward 3-week highs in Euro terms even as the European Central Bank made good on its promise to raise Eurozone base rates.
The ECB’s move came despite a formal bail-out request late yesterday from Portugal, currently under a caretake government and with a sovereign budget deficit equal to 8.6% of gross domestic product for 2010.
Western stock markets ticked lower early Thursday with crude oil, but government bond prices rose, nudging longer-term interest rates lower.
Silver prices held firm around $39.50 per ounce – a new 31-year high when breached Wednesday morning.
Claiming to be “ahead of the curve” today, ECB president Jean-Claude Trichet repeatedly stated his “core mandate” of providing “price stability for 331 million people” across all 17 nations in the single Euro currency union.
Set today at 1.25% per year, the cost of ECB loans for commercial banks remains sharply negative in real terms at less than half the pace of inflation pegged by the EuroStat data agency for March.
“We have lately been struck by the decline in gold’s sensitivity to fiscal crises among Europe’s peripheral economies,” says the latest weekly commodities analysis from French bullion and investment bank Natixis, noting the recent “strengthening” of the Eurozone’s EFSF stability fund.
“Investors no longer appear to be so concerned that defaults among Europe’s periphery will impact core countries…European investors have not been major buyers of gold since 2009, but given the volumes accumulated between 2008-9, there is increasing scope for some of this gold to find its way back onto the market.”
Gold investment through exchange-traded trust funds (ETFs) has fallen 4% by volume so far in 2011, according to Natixis’ math.
Gold futures trading by bullish money managers and investors has also fallen, with the “net long non-commercial” position dropping by 30% since Oct.
“Moms and dads are moving out, out of gold and into equities,” reckons Jonathan Barratt of Commodity Broking Services in Sydney, speaking to Reuters.
“But our expectation for gold moving higher has more to do with inflationary concerns, I think, particularly in China.”
Here in London, the Bank of England kept its key lending rate at a record low of 0.5% for the 25th month running on Thursday. On the latest UK data, that puts the real rate of interest – after Retail Price Inflation – at a negative 5.0% per year.
UK investors wanting to buy gold today saw the price rise £3 per ounce to £895, just shy of Wednesday’s four-month highs.
Earlier in Tokyo, the Bank of Japan held its key interest rate below 0.1%, surprising analysts with a further ¥1 trillion loan ($11.7bn) to the country’s earthquake-struck north-eastern region.
That takes the Bank of Japan’s total monetary response to the March 11th disaster to the equivalent of $394 billion.
The gold price in Japanese Yen pushed higher to fresh 28-year highs in Tokyo trade on Thursday.
“The most important issue here is Spain,” said Gabriel Stein, director of Lombard Street Research, commenting on the Portuguese bail-out for BBC radio on Thursday morning.
Spain, Greece, Ireland and Portugal make up less than 18% of Eurozone economic output, said Stein, but their banking sectors “are wholly dependent” on liquidity loans from the European Central Bank, accounting “for something like 60%” of the total.
“This [ECB rate rise] will hit them immediately.”
Some 85% of mortgage borrowers in Ireland and Spain are on variable rates, according to the European Mortgage Federation. That rises to perhaps 99% in Portugal, says the FT‘s Alphaville blog.
“Permanently negative real interest rates distort world financial markets dangerously,” writes Anders Åslund, a senior fellow at the Peterson Institute for International Economics.
Blaming the current “oil price shock” on sub-zero real rates across the world, “Central banks should face reality and raise their rates faster and higher,” says Åslund.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Silver “Diverts Attention from Gold” as Chinese Hike Puts Global Interest Rates “In Focus”
By: Adrian Ash, BullionVault
London Gold Market Report
WHOLESALE PRICES to buy gold repeated yesterday’s $10 range on Tuesday, briefly slipping in London beneath $1431 per ounce after the central bank in China – home to the world’s No.2 consumer market – raised interest rates for the second time in 2011.
The People’s Bank’s move took Chinese borrowing rates to 6.31%, with one-year bank deposit rates rising to 3.25%.
China’s March inflation rate, due for release next week, is expected to breach two-year highs above 5.1% according to analyst forecasts.
“Monetary tightening remains the focus for base metals,” says the latest comment from Standard Bank’s commodity team, warning again of over-heated copper prices. But “Precious metals shrugged off fears over an earlier monetary tightening in the US, and continued to climb [on Monday].”
“We won’t see much movement [in prices to buy gold] until Thursday,” reckons Mitsubishi metals strategist Matthew Turner, “when the ECB and the Bank of England will announce their decisions on interest rates.”
Silver had earlier jumped back to Monday’s new 31-year highs above $38.80 per ounce, knocking the Gold/Silver Ratio of their relative prices to the lowest level since Set. 1983 at just over 37 times.
The Reserve Bank of Australia meantime held its key rate at 4.75% for the fifth month running on Tuesday, noting that monetary policy “for the global economy overall…remain[s] accommodative.”
Brent crude oil today dropped $1 per barrel from near 30-month highs, while copper prices also edged lower as government bond yields rose.
European stock markets slipped to stand 0.5% lower on average. The British Pound jumped following news of the strongest service-sector growth in 12 months.
That knocked the price for UK investors wanting to buy gold today some 1.3% lower, nudging 1-week lows at £882 per ounce.
“It’s difficult to say [that silver prices are justified] but certainly they’re well-supported right now,” said Commerzbank head of metals research Eugen Weinberg in Frankfurt to Bloomberg yesterday, commenting on silver’s new 31-year highs above $38.50 per ounce.
“The proximity of the psychological $40 level is attracting speculative, risk-on money” into silver investment, said Weinberg.
“Worldwide industrial demand is also staying strong.”
“Silver continues to attract investor attention away from gold, and given current sentiment, $40/oz looks inevitable in the near term,” say analysts at Swiss investment bank and London market-maker UBS in a note.
“[But] there is the real danger that silver prices have travelled too fast, too soon.”
“We see a lot of demand for silver from China,” says Natalie Robertson, commodities strategist at ANZ in Melbourne, because “with China focusing more on renewable energy, especially after the nuclear crisis in Japan, they will probably be developing a lot more solar panels.”
“Fundamentally, the silver picture looks very strong,” she tells Reuters.
Exchange-traded trust funds holding silver to back the value of shareholder positions saw fresh inflows on Monday, with the iShares ETF product swelling to a record 11,162 tonnes.
Gold ETF positions held flat, however – little changed from May 2010 – while in the leveraged Gold futures market, “activity was less than half the average on Monday, set to be one of the weakest this year,” notes Richcomm Global Services DMCC of Dubai.
Meantime in Washington, Treasury secretary Timothy Geithner has written to US lawmakers, urging them to agree a new debt ceiling before Washington’s breaks its current legal limit of $14.3 trillion 6 weeks from now.
Geithner ruled out selling US gold reserves as a way of helping finance Washington’s spending.
Over in Europe, where the ECB is set to raise its key lending rate at Thursday’s policy meeting, a one percentage increase in borrowing costs “would [add] six extra years” to the debt stabilization schedule in Greece, notes Gary Jenkins at Evolution Securities.
Fellow bail-out recipient Ireland would also see “higher rates…slow down debt reduction,” notes the FT‘s Alphaville blog, reviewing the European Commission’s own research.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Gold “Consolidates”, Re-Asserts Link with Euro, as Physical Demand “Adjusts” to Higher Prices
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF GOLD rose Monday morning in London, nearing last week’s high of $1439 per ounce as energy prices led a rise in commodity prices and silver bullion jumped more than 1.8% to fresh 31-year highs.
Stock markets were mixed, rising in Hong Kong and London but holding flat in Tokyo and Paris, while Brent crude oil rose to a new 30-month peak near $120 per barrel.
New data showed the fastest year-on-year rise in Eurozone factory-input prices since Oct. 2008
“[Only] an aggravation of the crisis of the sovereign debt” will stop the ECB raising rates reckon Commerzbank analysts in Frankfurt.
German government debt prices fell for the 8th day running this morning – the longest losing streak for 10-year Bunds since mid-2006 according to Bloomberg – ahead of Thursday’s pre-announced interest rate hike by the European Central Bank.
“It is a shocking decision,” says Jacques Cailloux at RBS in Paris. “We thought that the ECB would wait until September.”
Interest rates on Portuguese government bonds rose to new post-Euro highs, hitting 8.60% per year on 10-year bonds, after accountancy giants Ernst & Young said that Lisbon will most likely need a bail-out before the general election called for June 5th.
“The ECB simply cannot raise rates too aggressively without breaking up the Eurozone,” warns Simon Maughan at MF Global here in London.
On the forex market the Euro currency was little changed against the Dollar on Monday, standing 2.7% higher from ECB president Trichet’s announcement a month ago.
Gold priced in the Dollar stood unchanged from early March, leaving the gold price in Euros some 2.3% lower for German, French and Italian investors.
Previously moving in the opposite direction to gold on average so far in 2011, however, the Euro currency has since shown a positive daily correlation with the gold price in Dollars.
The average correlation of +0.70 between gold and the Euro over the last month is also stronger than the last decade’s average of +0.47.
It would read +1.0 if they moved precisely in lockstep. Last May’s Greek deficit crisis saw the Euro’s link with Dollar gold prices slump to a near-perfect inverse correlation of –0.92 as the single currency fell and bullion rose.
“[The Dollar gold price] has closed near $1425 for the past four consecutive weekly sessions,” notes bullion bank Scotia Mocatta, “[and] appears to be consolidating the January to March up move.
“We believe the price action is continuation in nature, with an eventual resolve to the topside to $1500.”
Also noting the “strong weekly close” in silver prices, “most…technical studies are still clinging to bullish signals,” says Scotia.
“It is very difficult to fight the momentum” in silver prices, says a London dealer today.
Breaking through $38.00 early in Monday’s trade, “it seems the stage has been set for another crazy leg of upward movement in silver,” says a Hong Kong dealing desk.
“This is now a classical bubble when price movement itself becomes the reason for price movement.”
Back in the gold market, exchange-traded trust funds experienced a second week of outflows on the latest data compiled by London’s VM Group consultancy, with the giant SPDR Gold Trust shrinking to an 11-month low of 1211 tonnes.
Leveraged speculators in the gold futures market also trimmed their positions last week, say the latest Commitment of Traders data from US regulator the CFTC.
“[But] while the gold futures market is not overly bullish, the physical market is still a steady buyer,” says Standard Bank’s Walter de Wet, repeating his view that real interest rates “remain exceptionally low” and global liquidity continues to rise, pushing gold higher.
“The physical market is once again adjusting to a higher gold price, which we view as bullish…We now see increased buying whenever gold dips towards $1400.”
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
Gold & Silver Slump from New All-Time Highs as US Jobs Data “Raises Spectre” of Rising Rates
By: Adrian Ash, BullionVault
London Gold Market Report
THE PRICE OF physical gold bullion slumped 1.4% lunchtime Friday in London, falling back from its highest-ever monthly close as the Dollar jumped on news of stronger-than-expected US jobs hiring in March.
Silver prices also fell – losing nearly 2% – after also ending March at an all-time record high monthly close of $37.87 per ounce, more than $2 above the previous month-end high of Feb. 1980.
“From a big picture perspective, there is no sign that the current trend [in silver] is about to reverse,” says Russell Browne, strategist at bullion-bank Scotia Mocatta.
But “[although] some way off…the great risk to the metals remains the spectre of positive real interest rates,” says one London dealer in a note.
The US economy has added 837,000 jobs in the last 6 months on the official data. Total employment remains 2.4 million down from when the Federal Reserve moved to zero rates and quantitative easing at the start of 2009.
“What we have to see now is how gold fares in an environment of rising interest rates, where holding a non-yielding asset goes against you,” reckons RBS commodity strategist Nick Moore, speaking to Reuters.
Gold closed March higher “for the second month in a row,” notes Browne at Scotia, with “January’s correction to $1308 [now] viewed as a necessary retracement before making the next leg higher through December’s $1430.”
The price of spot gold for immediate delivery ended March at a new monthly-close record of $1439 per ounce at the London Fix.
Thursday saw the Spot Gold Price in Dollars complete its 9th quarterly gain in succession – the longest run since 1979 according to Bloomberg data.
Priced in the Euro, says BullionVault analysis, gold last night completed its 24th consecutive quarter of year-on-year gains, an unbroken run starting in June 2005.
Gold investment prices to private citizens in Japan rose today to a new 28-year high, reports Reuters, hitting ¥4065 per gram when the sales tax of 5% is included according to Tanaka Kikinzoku Kogyo, Japan’s largest gold retailer.
Gold bullion stored to back the world’s largest single gold trust fund, in contrast, actually shrank between Jan. and April, posting its largest quarterly decline since launching in Nov. 2004.
Worries over the Libyan conflict, plus fresh Eurozone debt concerns, “encouraged gold safe-haven buying” on the last day of the month, says Mark Pervan at ANZ Bank.
The BBC said today that 7 civilians were killed in a Nato-coalition airstrike on pro-Gaddafi forces.
After the government resigned last week, Portuguese president Anibal Cavaco Silva today called an election for June 5th, saying that “the next government faces an unprecedented economic and financial crisis.”
Ireland’s call for its banks to raise another €24 billion – to be funded out of state aid and EU bail-outs – “is the scale of the legacy that we have now inherited,” said Dublin’s new prime minister Enda Kenny.
“I can only hope this is the final scale of it.”
Shares in Bank of Ireland jumped when they resumed trading after a temporary suspension amid the stress test results. Rising to a 1-week high, however, BoI remained 98% below its peak of Feb. 2007.
The European Central Bank meantime “decided to suspend” credit-rating requirements on Irish government bonds when used by commercial banks to raise credit from the Frankfurt lender.
It’s now 12 months since the ECB made a U-turn on such “special treatment”, allowing Greek government bonds to be used as collateral despite sliding below the benchmark credit rating requirement.
Adrian Ash
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the World Gold Council market-development and research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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.
