London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 10 April 2012, 08:00 EDT
U.S. DOLLAR gold bullion prices fell as low as $1642 an ounce during Tuesday morning’s London trading – though still slightly up on last week’s close following Asian session gains – while stock markets fell and commodities were flat as markets digested last Friday’s disappointing US jobs data.
“Major support [for gold] comes from the long-term uptrend, which is still intact, currently around $1600,” says the latest technical analysis note from bullion bank Scotia Mocatta.
Based on PM London Fix prices, however, gold bullion remains below its 200-day moving average, which was $1687 per ounce following the last fix before the Easter break on Thursday.
Silver bullion meantime dipped to $31.49 per ounce before recovering some ground by Tuesday lunchtime in London, remaining broadly in line with where it began the week.
Asian traders reported increased physical gold bullion demand Tuesday, following the end of the three week strike by gold dealers in India, the world’s largest source of private gold demand.
Indian gold dealers are now turning their attention to this month’s Akshaya Tritiya festival as well as the wedding season.
“There were good retail sales yesterday,” Harshad Ajmera, proprietor of JJ Gold House, told newswire Reuters this morning.
Despite the strike ending, however, industry insiders predict that gold and silver imports will fall this year as a result of taxes, duties and volatile prices curbing demand to buy gold and silver.
Over in Vietnam meantime, reports reaching BullionVault over the weekend suggest that many jewelry shop owners will close their business when a new government decree comes into force next month, since they fail to meet specified criteria to operate in the industry.
European stock markets traded lower Tuesday morning, with both the FTSE in London and Germany’s DAX down 1% by lunchtime. The losses come after US markets sold off on Monday, following the publication on Friday of worse-than-expected US jobs data.
Nonfarm payroll data published by the US Bureau of Labor Statistics Friday show that the US economy added 120,000 nonagricultural private sector jobs in March – compared to analysts’ consensus estimates of over 200,000 – prompting speculation that the Federal Reserve might consider another round of quantitative easing.
Despite this speculation, gold prices remain below where they started last Tuesday, before the publication of Federal Open Market Committee minutes that appeared to suggest Fed policymakers have become less inclined towards additional QE.
“It looks like we need bigger and better news to support gold right now,” says Ole Hansen, senior commodity manager at Saxo Bank.
“Traders have been wrong-footed on numerous occasions during the last two months on QE on/off talks…The non-farm payrolls and India ending the strike should have triggered a stronger bounce, but at this moment… traders want to see the cash before jumping back into gold in a major way.”
The net long position of so-called speculative gold futures and options traders on the New York Comex – measured as the difference between bullish and bearish contracts – fell 6.5% in the week ended last Tuesday, according to the latest Commodity Futures Trading Commission figures.
“Last week’s poor jobs report raises doubts about the strength of the US expansion,” adds Dan Morris, London-based global strategist at JPMorgan Asset Management.
“There are some uncomfortable parallels between the current macroeconomic environment and that of July last year when equity markets began their precipitous fall. Investors are worried again about the Eurozone crisis.”
Benchmark yields on 10-Year Spanish government bonds climbed to 5.9% on Tuesday – their highest level since December – as investors worried whether it will become the fourth member of the single currency to require a bailout.
“Sentiment towards [Spain’s] sovereign bonds is now the bellwether for Europe’s debt crisis,” says Mansoor Mohi-uddin, chief currency strategist at investment bank UBS.
“If investor appetite wanes, then currency markets will start to price in either ECB rate cuts to help restore sentiment, or Madrid requires external assistance from its European Union partners.”
China meantime confounded analyst expectations by recording a trade surplus in March, data published Tuesday show. While imports rose 5.3% compared to a year earlier, exports were up 8.9%. The trade surplus was around $5.35 billion.
“The sluggish import growth shows weakening domestic demand and investment growth while exports are stabilizing,” reckons Barclays Capital economist Chang Jian in Hong Kong.
“Policymakers need to strike a delicate balance between preserving growth and containing inflation at this stage, yet they may tilt more toward sustaining growth in the second quarter.”
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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
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