London Gold Market Report
from Ben Traynor
Tuesday 6 March 2012, 08:45 EST
Physical Activity “Brisk” as Gold Falls to 6-Week Low, Spain Makes “Sovereign Decision” to Ignore EU, “Large Spending” Russia Warned by Fitch Ratings
SPOT MARKET prices for gold bullion hit a six-week low of $1682 an ounce Tuesday lunchtime in London – a fall of 1.8% from last week’s close – as stocks, commodities and the Euro continued their recent slide and uncertainty hung over recent European agreements.
Silver bullion dropped to $33.14 per ounce this morning – a 4.8% loss since the start of the week.
“We remain bearish so long as we remain below…the breached uptrend, currently at $1768,” says the latest note from technical analysts at gold bullion dealing bank Scotia Mocatta.
“A lot of gold investors are still affected by the large sell-off last week,” says Lynette Tan, analyst at Phillip Futures in Singapore, though she adds that gold is “very strongly supported at the 200-day moving average.”
Based on PM London Fix prices, gold’s 200 day moving average on Monday stood at $1672.57 per ounce.
“In the gold physical market, activity is brisk,” says Standard Bank commodities strategist Marc Ground.
“Customers are happy to buy at the current level,” adds one physical dealer in Singapore.
“Although things have slowed down a bit. I guess they could buy more if prices fall further.”
Major holders of Greek bonds came out in support of the Greek bond swap on Monday. Private sector bondholders have until Thursday evening to state whether they will take part in the arrangement, which involves losses estimated at some 70%.
“Whoever thinks that they will hold out and be paid in full, is mistaken,” Greek finance minister Evangelos Venizelos said Monday, adding that Greece is prepared to activate collective action clauses – inserted into contracts retroactively – that would force reluctant bondholders to take part in the deal.
A disorderly Greek default would have “some very important and damaging ramifications”, according to a memo circulated last month to staff at the Institute of International Finance, the body which negotiated with Greece on behalf of private sector creditors.
“It is difficult to add all these contingent liabilities up with any degree of precision, although it is hard to see how they would not exceed €1 trillion.”
The Dutch Freedom Party has called for the Netherlands to leave the Euro and return to the Guilder.
“The Euro is not in the interests of the Dutch people,” says the party’s leader Geert Wilders.
“We want to be the master of our own house and our own country, so we say yes to the Guilder. Bring it on.”
Wilders’s party is not a member of the Dutch governing coalition. The minority government does however depend on its support to pass legislation.
European Council president Herman van Rompuy urged the Dutch government on Sunday to cut its budget deficit from a projected 4.5% of gross domestic product next year to the 3% limit agreed by European leaders last Friday.
Spain’s prime minister meantime has said he will ignore the European Union’s deficit target of 4.4% of GDP this year. Mariano Rajoy has set his own target of 5.8% in what he called a “sovereign decision”. Last year Spain’s deficit was 8.5% of GDP, Britain’s Telegraph newspaper reports.
Overall Eurozone GDP meantime contracted in the fourth quarter of last year, recording a 0.3% quarter-on-quarter fall, according to official data published this morning.
Ratings agency Fitch has responded to Vladimir Putin’s election as Russia’s president by issuing a statement reminding investors that it cut the country’s outlook from ‘positive’ to ‘stable’ in January.
“Fitch Ratings is closely monitoring how quickly the new government will act to reform the Russian economy and hasten fiscal consolidation,” said a Fitch report Monday.
“Putin made large spending commitments prior to and during his election campaign, while members of the government’s economic team recommended fiscal consolidation.”
Ten US states are holding ballots in the contest to win the Republican presidential nomination in today’s so-called Super Tuesday elections. Mitt Romney and Rick Santorum appear favorites.
Former House of Representatives speaker Newt Gingrich, who has suggested the United States could consider tying the Dollar’s value to gold bullion, has fallen behind in the race.
Long standing gold advocate Ron Paul, who last week held up a silver coin during Federal Reserve chairman Ben Bernanke’s appearance before the House Financial Services Committee, is hoping to win Alaska, Reuters reports.
Following Bernanke’s testimony last week, gold bullion has fallen to levels not seen since January 25 – the day it spiked higher after Fed policymakers revealed they expect interest rates to stay near zero until at least late 2014.
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
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