Indian Gold Demand “Surprisingly” Absent as “Bearish Trend” Remains

October 27th, 2012 No Comments   Posted in Gold

London Gold Market Report

U.S. DOLLAR gold prices traded just above $1700 an ounce throughout Friday morning in London, following an overnight reversal of yesterday’s rally, while European stock markets traded lower this morning following losses in Asia, ahead of the release of US GDP data later today.

“The trend remains bearish so long as gold trades below $1723,” says the latest note from Scotiabank technical analyst Russell Browne.

“People are still looking a bit at the downside rather than the upside for the time being, waiting for it to break $1700,” adds Ronald Leung, director at Lee Cheong Gold Dealers in Hong Kong.

Silver prices traded just above $31.70 per ounce for most of the morning, 1.2% down on last Friday’s close, while other commodities also edged lower and major government bond prices gained.

“Commodities have come under renewed pressure, owing to the Asian equity markets weakening in the face of disappointing corporate data and a stronger US dollar,” says a note from Commerzbank.

The US Dollar Index, which measures the Dollar’s strength against a basket of other currencies, hit a new seven-week high this morning.

Dealers in Asia meantime reported a quieter session this morning, with public holidays in Singapore, Malaysia and Indonesia.

“There’s light buying from Thailand and that’s about it,” one dealer told newswire Reuters this morning.

“Surprisingly, the demand from India is not there…in fact, Indian consumers started to sell again when the market was a bit higher. Maybe they will leave it to the last minute [before next month's Diwali festival] before coming back to buy again.”

Going by London Fix prices, gold looked set for a third straight weekly loss Friday lunchtime in London, the first time this has happened since March.

“We continue to see modest pressure on gold prices in the near term,” says HSBC precious metals analyst James Steel.

Here in Europe, Spain’s unemployment rate rose to 25% in the third quarter, a new record high, according to official data published Friday.

Santander, the country’s biggest bank, yesterday urged the government to seek a formal bailout, which would pave the way for the European Central Bank to buy Spanish government bonds through its Outright Monetary Transactions program.

“A situation in which the Treasury funding is being helped by contingency credit lines offered by any international body will produce a fall in the sovereign debt risk premium and, as a consequence, a fall in banks’ risk premium,” said Santander chief executive Alfredo Saenz.

A Spanish bailout however is “a necessary, but not a sufficient condition” for ECB bond market intervention, ECB Executive Board member Joerg Asumussen said Friday.

Spain has already agreed a credit line of up to €100 billion from Eurozone rescue funds to finance the restructuring of its banking sector.

Elsewhere in Europe, ratings agency Standard & Poor’s last night downgraded French bank BNP Paribas by one notch, from AA- to A+. Ten other French banks, including Credit Agricole and Societe Generale, were put on negative outlook.

Nine more banks have been named as part of the ongoing Libor investigation. Bank of America, Bank of Tokyo Mitsubishi, Credit Suisse, Lloyds, Norinchukin, Rabobank, Royal Bank of Canada, Societe Generale and West LB have all been sent subpoenas by the New York and Connecticut attorney-generals.

In South Africa, the majority of striking workers in the gold mining sector returned to work yesterday, Reuters reports, after unions agreed a wage deal with mine operators.

Anglo American Platinum meantime said Thursday it lost an estimated 138,000 ounces of platinum output, equivalent to over $200 million, as a result of South African strikes. The chief executive of Anglo American, which owns an 80% stake in Amplats, resigned Friday after leading the company for nearly six years.

In other mining news, African Barrick Gold lowered its 2012 production forecast Friday, when it also reported a 1.6% rise in cash costs per ounce as part of its third quarter results. China Gold is currently doing due diligence as part of its bid to buy Barrick Gold’s 74% stake in African Barrick.

Here in London, gold trading through London’s 11 market-making banks jumped 35% last month from August to the highest Dollar value since the all-time record gold prices of summer 2011.

The average daily volume of gold bullion transferred between wholesale market clearing members climbed 26% last month compared to August.

The daily average volume of silver bullion transferred increased 4% month-on-month in September.

Ben Traynor

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.

Big Jump in London Gold Trading

October 27th, 2012 No Comments   Posted in Gold

Wholesale gold trading through London’s global center just leapt towards summer 2011′s records…

GOLD TRADING in London – heart of the world’s wholesale bullion market – leapt in September.

How come? “The continued economic uncertainty in the Eurozone and US, the end of the holiday period and the start of the Indian festival season boosted clearing turnover,” says trade body the London Bullion Market Association, releasing the new data to members on Thursday.

But matched by a sharp rise in the size of gold-backed trust funds traded on the stock market (ETFs), these latest figures really suggest strong interest from hedge funds, investment banks and other institutions around the US Federal Reserve’s announcement of QE3, we believe.

Why QE3 as the catalyst? Because the so-called “smart money” had been hanging on Ben Bernanke’s every word all year…willing him to make free and easy with his electronic printing press once again. And why that group? Because the other potential buyers just weren’t so hot – buyers whose demand would have quickly registered back up the supply chain at the wholesale level – and certainly not hot enough to push gold trading through its world center in London to the third highest value on record.

Jewelry suppliers in India have kept a lid on their stockpiling, even ahead of the annual peak in demand due with Diwali in mid-November. Private households (aka “retail” investors) raised their demand in September, but not dramatically, as Bullion Vault’s own Gold Investor Index shows. And amongst those central banks who declare their hand each month to the International Monetary Fund (ie, everyone but China), September 2012 saw them pretty much flat overall as a group.

So you have to guess, therefore, that the so-called “smart money” was the big buyer, helping drive the daily value of gold bullion traded through London’s 11 big market makers more than 35% higher in September from August to its highest level since summer 2011′s all-time peaks.

Those 11 market makers – led by global investment-bank and London vault operators HSBC and J.P.Morgan, and all guaranteeing to quote firm Gold Buying and selling prices throughout the day – shifted some $39.2 billion-worth of gold between them on average each day last month. Make a guess at all of September’s other gold trading done via smaller bullion banks and dealers, all still quoting prices for settlement in London’s secure and accredited vaults, and the total could have reached to $350bn. That’s the multple suggested by spring 2011′s market-wide survey, undertaken by the London Bullion Market Association on behalf of the World Gold Council.

The aim of that report, in which the LBMA surveyed all its members, was to gauge the true depth and liquidity of the physical gold market. The previous best guess-timate – of a multiple between 3 and 5 times the average daily turnover reported by the big 11 banks – now looks it should stand nearer 8 times. Especially when gold trading gets hot, as it clearly did in September.

Some of that hot money has turned tail since. This month’s pullback so far has taken Dollar-gold 4% lower to $1700 per ounce. Perhaps hedge funds, bank traders and other private institutions simply booked early profits off their September gold trading. Or perhaps they’re disappointed that QE3 didn’t instantly send inflation soaring.

Give it time. “There is a great deal of ruin in a nation,” as Adam Smith calmly replied when told in October 1777 that Britain was ruined by its defeat by the American rebels at Saratoga. Yes, it took another 170 years for the British Empire to crest and collapse. But today’s limitless zero-rate money won’t have anything like as long.

Adrian Ash

Adrian Ash is head of research at BullionVault – the secure, low-cost gold and silver market for private investors online, where you can buy physical gold today vaulted in Zurich and store it securely with insurance included for as little as $4 per month.

(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.

So, Who’s Been Bidding Gold Higher?

October 4th, 2012 No Comments   Posted in Gold

A unique, innovative tool for seeing just what private investors are doing in gold…

GOLD was up, up and away in September. But who was doing the buying?

New data we released today here at BullionVault show that private households across Western Europe and the US continue to join the bull market. But their response to QE3 and the latest phase of the Eurozone crisis is more measured – you might even say complacent – than the recent price action alone suggests.

“There has until now been a lack of hard data on self-directed retail investors in gold,” said Marcus Grubb of the World Gold Council, which is a shareholder in BullionVault, at today’s launch here in London of our new Gold Investor Index.

“For instance, the data we produce [the excellent Gold Demand Trends] is more at the macro level, including institutional and private wealth management. This new Gold Investor Index is a real innovation – a unique and useful addition to the data already available. It’s a coincident indicator of what private households are choosing to do with regards to physical gold.”
How so? BullionVault’s new Gold Investor Index is a monthly data point based on actual trading on BullionVault, the world’s largest provider of physical gold ownership to private investors. Since launch in April 2005 it’s now been used by more than 42,000 private investors from 159 countries worldwide.

Almost 90% of BullionVault users live in the UK, US or Eurozone. So the Gold Investor Index shows what the largest pool of private gold investors in the developed Western world is doing with its metal – either buying more or selling, or choosing to sit tight. They can all make that decision as they choose using BullionVault’s peer-to-peer exchange online, a truly international market in physical bullion which is accessible to people all over the world. You will not find a more reliable guide to the wider retail-investment market in physical gold.

How does BullionVault’s Gold Investor Index work? First, it takes the balance of net buyers (who added to their holdings, and so includes new entrants) versus net sellers over the last calendar month. The index then shows that figure as a proportion of all existing gold owners to give a comparable series over time. The index is rebased so that a perfect balance of buyers and sellers would give a reading of 50.0.

In September this year therefore, and as the chart shows, self-directed investors in the West grew more bullish on gold. Rising from August’s reading of 52.1 to 52.5, however, the Gold Investor Index still lagged levels seen earlier this year, and it was well below the series-record to date – the level of 71.7 hit in September 2011.

So, September 2012′s reading on the Gold Investor Index undoes any talk of a “gold bubble” amongst Western households. Because the private investor response to QE3 and the latest phase of the Eurozone crisis is far more measured than the last time gold prices reached their current level. This may give succour to central bankers and other policymakers hoping to buy time. The index suggests households are less anxious about inflation or a currency crisis than bank analysts and managed wealth advisors.

It’s hard to find any gold bears amongst professional investors right now. Amongst self-directed retail investors too, sentiment towards gold is bullish. But hard transactional data from the world’s largest pool says they’re not as bullish – in aggregate – as they were earlier in the year. And sentiment towards gold is way below the moments of extreme investor stress seen previously in this financial crisis, such as late-summer 2011.

The new Gold Investor Index confirms what we’re hearing from our friends and contacts in the coin and small-bar business. Sales have been lacklustre since spring. That may change, however, if the UK’s over-valued Pound, the Eurozone’s unceasing crisis, and the US fiscal cliff crash into each other towards New Year. Either way, the new Gold Investor Index will clearly show how private investors respond.

Adrian Ash

Adrian Ash is head of research at BullionVault – the secure, low-cost gold and silver market for private investors online, where you can buy physical gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(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.

Gold Hovers After Touching New Highs, Gold Allocation “Part of Diversified Portfolio” says Pimco

October 3rd, 2012 No Comments   Posted in Gold

London Gold Market Report

WHOLESALE gold prices hovered in a tight range just below $1780 an ounce for most of Tuesday morning in London, just below a new 2012 spot market high touched yesterday following comments from US Federal Reserve policymakers.

Silver prices traded just below $35 per ounce, close to seven-month highs, while stocks and the Euro ticked higher despite warnings that Spain is underestimating the amount of recapitalization its banks need.

Commodities were broadly flat, with copper showing some strength, while major government bond prices fell.

A day earlier, Dollar gold prices touched a new 2012 high at $17971 per ounce during Monday’s US session, while the gold price in Euros set a fresh all-time record at €44,583 per kilo (€1386 per ounce).

“The gains were prompted by Fed President Evans’ comments that the quantitative easing measures adopted [by the Fed last month] did not go far enough,” reckon analysts at Commerzbank.

“On top of this, Fed Chairman Bernanke expressed concern about weak economic growth, making additional bond purchases a possibility… In a climate of ultra-loose monetary policies and the relentless Eurozone debt crisis, demand for gold as a store of value and alternative currency is likely to remain strong.”

“We believe investors should consider allocating gold and other precious metals to a diversified investment portfolio,” say analysts Nicholas Johnson and Mihir Worah at world’s largest bond fund Pimco.

“The supply of gold is constrained, and we see demand increasing consistent with global economic growth on a per capita basis. Regarding inflation in particular, we feel that the Federal Reserve’s decision to begin a third round of quantitative easing makes gold even more attractive.”

Holdings of gold backing the world’s largest gold ETF, SPDR Gold Shares (GLD), rose by nearly 2 tonnes to 1322.6 tonnes yesterday, the first day of the new quarter, though they remain 0.7% off last Tuesday’s all-time high.

Investment bank UBS meantime has said it expects a boost in physical gold trading volumes when China returns from a week-long holiday next week.

Spain’s banks could need up to €105 billion to absorb potential losses on their loans, according to ratings agency Moody’s. That’s more than last Friday’s €60 billion estimate and more than the €100 billion credit line Spain agreed with other Euro members in June.

“The recapitalization amounts published by Spain are below what we estimate are needed for Spanish banks to maintain stability in our adverse and highly adverse scenarios,” say Moody’s analysts Maria Jose Mori and Alberto Postigo.

“If market participants are skeptical about the stress test, negative sentiment could undercut the government’s efforts to fully restore confidence in the solvency of Spanish banks.”

Spain’s government meantime is ready to ask for a bailout to help fund public spending as soon as next weekend, although Germany would prefer it to wait, Reuters reports.

“It doesn’t make sense to send looming decisions on Greece, Cyprus and possibly also Spain to the Bundestag one by one,” a senior German source told the newswire.

“Bundling these together makes sense, due to the substance and also politically.”

Here in the UK, house prices are likely to be flat or modestly declining over the next 12 months, according to building society Nationwide.

Across the Atlantic, the Commodity Futures Trading Commission may now find it impossible to revive its plan to introduce a new “position limits” rule after the move was blocked in court last week, according to a Florida law professor.

On Friday, US District Judge Robert Wilkins ruled that the move was unnecessary in order for the CFTC to comply with the Dodd-Frank Act and rejected it.

“Even if Democrats win the White House, the rulemaking process will take years to complete and, my guess, the Democrat commissioners at the CFTC will probably have lost their appetite for this battle,” says Jerry W. Markham of the Florida International University at Miami.

“I am disappointed by [the] ruling,” CFTC chairman Gary Gensler said Friday.

“The Rule addresses Congress’s concern that that no single trader is permitted to obtain too large a share of the market, and that derivatives markets remain fair and competitive. I believe it is critically important that these position limits be established as Congress required….we are considering ways to proceed.”

Among the activity regulated by the CFTC is the trading of silver and gold futures and options on the Comex.

In South Africa, which has been hit by a series of strikes and protests and platinum and gold mining sites, the world’s biggest platinum producer Anglo American Platinum has said it will fire any striking workers who do not turn up to a disciplinary hearing today.

Ben Traynor

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.

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

September 26th, 2012 No Comments   Posted in Gold

London Gold Market Report

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

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.

Gold as an Inflation Hedge

July 13th, 2012 No Comments   Posted in Gold

Today’s AM fix was USD 1,594.50, EUR 1,293.29 and GBP 1,026 per ounce.
Monday’s AM fix was USD 1,581, EUR 1,287.15 and GBP 1,020.66 per ounce.

Gold closed at $1,587.80/oz in New York yesterday after having hit an intraday high of $1,592.80/oz. Gold’s gain on the day was $4/oz, or 0.25%. Silver closed at $27.34/oz, with a $0.23/oz or a 0.85% gain.

Gold has been trading up in Asian and Europe this morning, and is currently at $1,595.83/oz. Silver is trading at $27.9/oz.

WGC – Gold as a Tactical Inflation Hedge and Long-Term Strategic Asset

The last of the World Gold Council reports examined this week deals with the role of gold as an inflation hedge and a long-term strategic asset. The report says that traditional assets like fixed-income bonds and equities tend to not perform well during periods of high inflation. Gold, on the other hand, has been used as an inflation hedge for centuries. It is shown that gold’s performance has been best in the years when inflation in the US has been the highest.

The report concludes that gold, as other traditional inflation hedges like other commodities, property, and inflation-linked bonds, is likely to outperform mainstream financial assets when inflation is high. Strategically, gold is recommended as a portfolio diversifier.

The full report is available on the World Gold Council website.

FOMC “Influencing Gold More Than Eurozone”, Extending Operation Twist “May Not Be Sufficient”, Spanish Borrowing Costs Soar

June 19th, 2012 No Comments   Posted in Gold

London Gold Market Report

THE U.S. DOLLAR gold price hovered around $1630 an ounce during Tuesday morning’s trading in London – in line with where it ended last week – while stocks and commodities were also broadly flat ahead of the latest Federal Reserve policy meeting.

The silver price traded in a tight range just below $29 an ounce – 1.7% up on Monday’s low.

Over in India, traditionally the world’s biggest gold buying nation, local press report that the Rupee gold price set a fresh record in Delhi Tuesday, as the Rupee fell against the Dollar on international currency markets.

“There has been very light buying from India, but it’s really quiet there,” says one Singapore-based dealer, adding that there has been a pickup in scrap gold bullion sales from Thailand.

“I guess there’s a kind of wait-and-see attitude because there’s a lot of uncertainty in the market.”

“For the moment,” adds Lynette Tan, investment analyst at Phillip Futures in Singapore, “we expect policy decisions from the Fed to influence the gold price more than risk appetite linked to the Euro crisis.”

The Federal Open Market Committee meets today and tomorrow to decide any changes to US monetary policy.

“We would be quite surprised if we saw no [Fed policy] easing this week,” says a note from Jan Hatzius, chief US economist at Goldman Sachs.

“We believe that an extension of Operation Twist could well be insufficient on its own and could thus be followed by additional easing action before long,” added Hatzius, suggesting the Fed could consider a “sufficiently large program” of mortgage-backed securities purchases.

However, “the agency MBS market might have more trouble accommodating the Federal Reserve this time” says a note from Barclays. The Barclays economists point out that the Fed will be keen to avoid its actions creating “dislocations” in markets, meaning it could include more US Treasury bond buying in any new round of quantitative easing.

Here in Europe, Spain saw its borrowing costs rise to over 5% for one year – up from 1.985% last month – when it auctioned €2.4 billion of 12-Month bills on Tuesday. A further €639 million of 18-Month bills were sold at an average yield of 5.1%, up from 3.3% at the last similar auction.

Benchmark Spanish 10-year yields eased slightly following the auction, but remained above 7% by Tuesday lunchtime in London.

European leaders announced last week that Spain plans to borrow up to €100 billion from Eurozone rescue funds to finance the restructuring of its banking sector, with stress test results due to be published later this week.

“It is not at all clear whether Spain’s rescue package will help bring about the definitive clean-up of its banking sector,” says Nicholas Spiro, managing director of consultancy Spiro Sovereign Strategy, which specializes in sovereign credit risk.

“Spaniards, like the markets, fear the €100 billion credit line is the prelude to a full bailout accompanied by much stronger conditionality.”

Elsewhere in Europe, investor sentiment in Germany has turned decidedly bearish in recent weeks, according to the widely-followed ZEW Indicator of Economic Sentiment. The indicator has fallen by 27.7 points – the biggest fall since 1998 – from 10.8 last month to -16.9.

The International Monetary Fund announced Monday that the amount of additional funding pledged by governments has risen from $430 billion to $456 billion.

The additional funds “Will be drawn only if they are needed as a second line of defense”, IMF managing director Christine Lagarde said.

Eurozone governments “will take all necessary policy measures to safeguard the integrity and stability of the Euro area, including the functioning of financial markets and breaking the feedback loop between sovereigns and banks”, according to a leaked draft of the communique from the G20 meeting in Mexico, which continued Tuesday.

“Trader concerns are being confounded by the apparent idleness at the G20,” says one trader quoted by the Wall Street Journal.

“What was hoped would be a definitive meeting of the world’s most powerful economies devising a solution to the slowing global growth story, unfortunately looks to be plagued with the same sort of inertia that led Eurozone policy makers to stand by as the crisis mushroomed.”

Here in the UK meantime, consumer price inflation eased to 2.8% last month – down from 3.0% in April – according to consumer price index data published Tuesday. This is the first time CPI inflation has fallen below the Bank of England’s upper tolerance of 3% since 2009.

Across the Atlantic, CME Group, which operates New York’s Comex exchange, has announced plans to allow holders of short-dated gold options to exercise into gold futures positions at expiry, with effect from the start of next month – though CME tells Reuters it has no plans to extend this to longer-dated instruments. Currently, all gold options holders are only able to settle for cash.

Ben Traynor

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.

(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 “Struggling for Momentum” But “Still Respecting Long Term Uptrend”, Investment Demand Insufficient to Compensate for Current Slow Physical Market

April 3rd, 2012 No Comments   Posted in Gold

SPOT MARKET gold prices jumped to $1669 per ounce ahead of Monday’s US trading, broadly in line with where they ended last week, though they remained below the Asian session peak touched briefly following the release of positive Chinese manufacturing data.

“Gold [is] still respecting the long-term uptrend,” says the latest technical analysis note from bullion bank Scotia Mocatta.

Silver bullion prices hovered around $32.50 per ounce – 0.5% up on Friday’s close – while stocks failed to hold onto early gains.

Commodities were broadly flat and US Treasuries ticked higher.

Physical precious metals markets reported quiet activity Monday morning, with Chinese markets closed until Thursday for the Qingming Festival and Indian jewelry dealers still on strike.

“There is no business in gold and silver,” Kumar Jain, vice president of the Mumbai Jewellers’ Association, which covers ten thousand jewelers, told Reuters.

“The whole value chain has shut.”

Imports of gold bullion by India, the world’s largest gold consumer last year, fell by 55% last month, according to Bombay Bullion Association president Prithviraj Kothari, as jewelers shut their shops following an announcement by India’s government that they were doubling the duty on gold imports and taxing gold jewelry sales.

“Sales have dipped drastically as almost 80 to 90 per cent of the jewelers have joined the protest against duty hike,” says Kothari.

In New York meantime, the net long position of so-called speculative gold futures and options traders on the Comex – measured as the difference between bullish and bearish contracts – rose 15% in the week ended last Tuesday, according to data released at the end of last week’s trading by the Commodity Futures Trading Commission.

Open interest however hit its lowest level this year on a Tuesday – the day of the week for which the CFTC publishes its Commitments of Traders reports. Data from CME Group show it fell further towards the end of last week.

“Gold [lacks] sufficient investment enthusiasm to be able to sideline the physical market as it did earlier in the year,” says a note from Barclays.

“Prices are struggling to gain momentum.”

“Recently prices have been driven strongly by speculative sentiment and it is not surprising to see those pullbacks,” adds Eugen Weinberg, head of commodities research at Commerzbank.

“But in the longer term, we still stay very confident that the upward trend in gold is still very constructive…I think in the longer term, gold will perform even more like a currency, and be less dependent on the jewelry sector.”

Here in Europe, Eurozone finance ministers agreed Friday to allow the roughly €300 billion already committed from the temporary bailout fund, the European Financial Stability Facility, to run alongside the €500 billion European Stability Mechanism, the permanent bailout vehicle due to become operational in July.

However, uncommitted funds from the €440 billion EFSF will not be available once the ESM comes in, capping the amount available for new rescues at €500 billion.

European leaders were told at February’s G20 meeting that they needed to do more to solve the Eurozone crisis before they asked for extra money from the International Monetary Fund.

“Europe has done its part,” said French finance minister Francois Baroin after Friday’s talks. The IMF is due to meet on April 20.

Some European banks meantime are planning to repay loans from the European Central Bank’s longer term refinancing operations two years early to avoid needing to raise money at the same time as many other banks, the Financial Times reports.

Banks borrowed over €1 trillion at the two LTROs in December and February.

Elsewhere in Europe, Eurozone manufacturing activity continued to fall last month – and at a faster rate than February – according to purchasing managers index figures released Monday.

Eurozone manufacturing PMI fell from 49.0 in February to 47.7 in March, with a figure below 50.0 indicating sector contraction. The unemployment rate in the Eurozone meantime rose to 10.8% last month, up from 10.7% in January, official data showed Monday.

In Germany, manufacturing PMI fell from 50.2 in February to 48.4 last month

By contrast, the latest data show the UK’s manufacturing sector continued to grow last month, with March’s PMI reported as 52.1, up from 51.5 in February.

China also reported accelerating growth in its manufacturing sector, with March’s official PMI reading 53.1, up from 51.0 the previous month.

“Keep in mind that in March the official PMI always rises 3 percentage points from its February level,” says Zhang Zhiwei, chief China economist at Nomura.

“Compared to the past, the official average PMI is about 56, whereas this month, it`s only 53. It’s still very much lower.”

Economists at Societe Generale however counter that even adjusting for seasonality, China’s PMI remain above 50, while “the ‘seasonality’ this March was not especially large relative to the same month in previous years,” adds SocGen interest rate strategist Christian Carrillo.

Over in the US, the first three months of 2012 saw the US Mint record its lowest first quarter sales figures for gold coins in four years.

Ben Traynor

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.

(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 Climbs Above 200-day Average, Bernanke “Dovish Again” while Eurozone “Still Insolvent”

March 28th, 2012 No Comments   Posted in Gold

London Gold Market Report

THE SPOT MARKET gold price traded just below $1700 an ounce for most of Tuesday morning in London – over 4% up on its low last week – before heading lower just ahead of the US markets open as the US Dollar regained some of the ground it lost on Monday following comments by Federal Reserve chairman Ben Bernanke.

The silver price rose to $33.25 per ounce – a 6.8% gain since its week’s low last Thursday – before it too eased.

The US Dollar Index, which measures the Dollar’s strength against other major currencies, hit its lowest level since the start of the month Tuesday. Longer-dated US Treasuries dipped, while European government bonds gained despite warnings that the sovereign debt crisis has not been resolved.

European stock market gains were relatively muted Tuesday morning, compared to those of the preceding Asian and US sessions, while commodities were broadly flat.

Yesterday saw the gold price move back above its 200-day moving average – which by PM London Fix prices stood at $1682 per ounce Monday afternoon in London – after Bernanke spoke of the need for “continued accommodative policies” and said that the labor market “remains far from normal” despite recent signs of improvement.

“Bernanke was back on solidly dovish ground again,” say Standard Bank currency analysts Steve Barrow and Jeremy Stevens.

“Rightly, or wrongly, the market seems to think that his comments could imply another loosening of [policy] via some form of QE3,” they added, referring to the possibility of a third round of quantitative easing.

“Fed likely to hint at QE3 in April meeting,” said Bill Gross, managing director of world’s largest bond fund Pimco, via the fund’s Twitter account.

Physical gold demand meantime “has shot higher as demand from South-East Asia in particular increased with gold below $1,650 over the past few days, no doubt providing support to the gold price when investor sentiment turned bearish,” says Walter de Wet, commodities strategist at Standard Bank, citing the bank’s Gold Physical Flows Index.

Over in New York, the world’s largest gold ETF, the SPDR Gold Trust (GLD), added 6 tonnes to its gold holdings yesterday.

Also in New York, today sees the expiry of April options on Comex gold futures contracts, with a lot of open interest – both bullish and bearish – clustering around the $1700 an ounce mark. The last options expiry date on 23 February saw gold prices jump to a then 3-month high.

Economic growth meantime “is stalling” in Europe, according to Angel Gurria, secretary-general of the Paris-based Organisation for Economic Co-operation and Development.

“Market confidence in the Euro area is fragile,” says the OECD’s ‘Economic Survey of the Euro Area 2012, published today.

“The outlook for growth is unusually uncertain and depends critically on the resolution of the sovereign debt crisis.”

Eurozone finance ministers are due to meet this Friday where they are expected to agree an increase in the size of the single currency’s so-called ‘firewall’ by combining the existing temporary bailout fund with the new permanent one that launches in July, after Germany dropped its opposition to such a move.

“Everybody knows [the combined fund] is not going to be big enough,” says Robert Crossley, head of European rates strategy at Citi.

“But less inadequate is a good thing.”

“The Eurozone remains insolvent,” adds Jim Leaviss, head of retail fixed income at M&G Investments.

“Growth is still a problem.”

Germany’s Deutsche Bank meantime has overtaken France’s BNP Paribas to become Europe’s largest bank, as a result of adding to its assets while other banks have been shrinking their balance sheets, according to newswire Bloomberg.

The likelihood that the German government would support its largest bank in the event of a crisis was cited by Fitch in December when the ratings agency gave Deutsche a stable outlook.

“We haven’t solved the too-big- to-fail challenge in this country,” says Ralph Brinkhaus, a member of Germany’s finance committee as well as chancellor Angela Merkel’s CDU party.

“That problem becomes all the more a matter of concern the bigger the bank is…and in the case of Deutsche Bank, is becoming.”

A Morgan Stanley co-authored report has suggested that banks worldwide will look to reduce the size of their balance sheets by $1 trillion over the next two years.

Here in the UK, Abu Dhabi’s ruling family is in talks with the British government about buying a stake in the 83%-taxpayer-owned Royal Bank of Scotland, news agency Reuters reports.

The gold price could “peak at well over $2000″ an ounce, Mark Cutifani, chief executive of gold mining firm AngloGold Ashanti said Tuesday.

Turkey’s central bank today raised the proportion of domestic currency reserves Turkish banks can hold as gold from 10% to 20%, while simultaneously lowering the proportion for foreign exchange reserves from 10% to zero.

Turkey is one of a number of countries facing current account deficits and exchange rate problems that have recently turned their attention to gold.

Ben Traynor

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.

(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 “Remains Vulnerable” while “Silver Support Threatened” by Downtrend, UK Deficit “Surprises” Ahead of Budget

March 22nd, 2012 No Comments   Posted in Gold

London Gold Market Report

WHOLESALE MARKET gold prices rose to $1660 an ounce Wednesday morning London time – more or less where they ended last week – before easing ahead of US markets open, while stock, commodity and government bond prices held broadly steady following news that the UK government deficit rose sharply last year.

Silver prices meantime dipped below $32 per ounce around lunchtime – a 1.8% drop on the week so far.

“Silver is in a short-term downtrend and is likely to breach support…at $31.81,” says the latest technical analysis note from bullion bank Scotia Mocatta, who add that the next target would be $30.48.

Over in India, the strike by Gold Dealers in protest at last week’s gold import duty hike entered its fifth day Wednesday.

“We harbor little doubt that gold remains vulnerable,” says a note from UBS precious metals analyst Edel Tully.

“Upside drivers are lacking and physical markets have yet to show a convincing response to lower prices.”

Here in the UK, the latest Bank of England Monetary Policy Committee minutes published on Wednesday show that two of the nine MPC members voted in favor of expanding the Bank’s quantitative easing program by £25 billion when the MPC met earlier this month. The majority voted to maintain the size of the program at £325 billion.

The decision to leave interest rates at 0.5%, where they have been since March 2009, was unanimous.

The MPC minutes noted significant risks to economic activity that might result in inflation falling materially below the [MPC's 2%] target in the medium term”.

MPC member Spencer Dale however, who voted to six times for a rate increase in 2011 – said in a speech Tuesday that in his view “inflation is just as likely to be above as below the inflation target in the medium term”.

The UK government deficit meantime rose to £12.9 billion last month – more than double consensus estimates – figures published hours before Wednesday’s Budget show.

Lower tax receipts contributed to the deficit growth, the Financial Times reports, with HM Revenue & Customs data showing an 8% fall in self-assessment tax revenues compared to February last year.

The news “provides a very uncomfortable background for the budget,” says Investec economist Philip Shaw.

“The fact there has been a worsening on this scale is a big surprise.”

Britain is expected to issue the second largest amount of government debt – known as gilts – on record this coming fiscal year, according to a Bloomberg survey of primary bond dealers.

“The government has a tough balancing act,” says John Wraith, London-based fixed-income strategist at Bank of America Merrill Lynch.

“Growth is going to be at best anemic, and it’s going to take a long time to reduce gilt issuance. They need to reduce debt, but if they stick rigidly to their fiscal consolidation plan, they risk killing growth.”

The FT argued this week that UK policymakers are engaged in financial repression, holding interest rates below inflation and creating a captive market for government bonds in an effort to lower the real value of national debt.

Federal Reserve chairman Ben Bernanke will warn of the US financial system’s exposure to Europe when he appears before the House Oversight Committee today.

“US financial firms and money market funds have had time to adjust their exposures and hedge their risks to some degree as the European situation has evolved, but the risks of contagion remain a concern for both these institutions and their supervisors and regulators,” Bernanke will say, in prepared remarks published ahead of the testimony.

On Tuesday, Bernanke gave the first in a series of four college lectures on the Fed’s role in the economy, in which he described a gold standard as a “waste of resources” and a “far from perfect monetary system”.

“Since the gold standard determines the money supply, there is not much scope for the central bank to use monetary policy to stabilize the economy…Under a gold standard, typically the money supply goes up and interest rates go down in a period of strong economic activity—so that’s the reverse of what a central bank would normally do today.”

Congressman Ron Paul last year asked Bernanke if he though gold was money, to which the Fed chairman replied ‘No’. Last month, Paul held up a silver coin while questioning Bernanke, saying that it “is what the market has always said should be money”.

Russia’s central bank gold holdings 3.1 tonnes of gold last month, equivalent to 0.35% of its official reserves, data published Tuesday show.

Over in the US meantime, holdings in the world’s largest gold ETF, the SPDR Gold Trust (GLD), fell 3 tonnes to 1290.2 tonnes yesterday, having held steady for one week. Silver bullion holdings in the iShares Silver Trust (SLV), the world’s biggest silver ETF, remained steady at 9752.7 tonnes.

Ben Traynor

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.

(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.

Get Adobe Flash playerPlugin by wpburn.com wordpress themes
AWSOM Powered