London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 7 August 2012, 07:15 EDT
THE SPOT MARKET cost of buying gold climbed to $1616 an ounce Tuesday morning in London, its highest level so far this week, as commodity prices and stocks markets also edged higher, with the exception of the FTSE which was hit by allegations that one London-listed bank has hidden “secret transactions” from US regulators.
“Gold appears to be enjoying increasing popularity again,” says Commerzbank’s Commodities Daily note.
“There would appear to be brisk buying interest on the market below [$1600]…which should provide the price with a safety net.”
The US Dollar gold price has remained within 3% of $1600 for virtually all of the last two months.
“The market as a whole lacks conviction,” says Marc Ground, commodities strategist at Standard Bank.
“The little confidence that was forming will most likely have been destroyed by last week’s disappointment [from the lack of action by the Federal Reserve and European Central Bank].”
“We continue to like precious metals, even as central bank event risks have been largely removed until September,” says a note from Societe Generale.
“Further disappointment with politically driven ‘growth agendas’ should confirm the need for even stronger monetary solutions to reignite nominal growth.”
The price of buying silver meantime rose to $28.12 an ounce – up 1% so far this week – while on the currency markets the Euro held steady near one-month highs above $1.24.
Major European stock indices were up on the day by lunchtime, with the exception of the FTSE in London, which was hit by a fall of more than 20% in Standard Chartered shares after the bank was accused by the New York State Department of Financial Services of violating US law by dealing with Iran.
“For almost ten years, [Standard Chartered] schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion,” says the New York State Department filing, which describes the London-headquartered bank as a “rogue institution”.
Standard Chartered last night issued a statement saying it “strongly rejects the position and portrayal of facts made by the New York State Department of Financial Services.”
In India meantime, the “sputtering” monsoon is set to hit gold buying ahead of the forthcoming wedding season, traditionally associated with strong demand for gold, the Wall Street Journal reports.
“In India, the monsoon is another negative factor [for gold],” the WSJ quotes Michael Shaoul, chairman of Marketfield Asset Management, which looks after over $2.5 billion. Shaoul also says India’s relatively high interest rates also give people an incentive to keep cash in savings account rather than convert it into gold bullion.
The Rupee has lost over 20% of its value against the Dollar over the past 12 months, a factor that has contributed to record Rupee gold prices in recent weeks. In addition, India’s government has twice increased import duties on bullion since the start of 2012.
“We’re all aware of the current conditions in India,” says Ani Markova, co-manager at AGF Precious Metals Fund, which manages $600 million.
“But India hasn’t been a strong player in the market this year…I think China is driving the bus.”
In the six months to the end of March China overtook India to become the world’s biggest source of demand for buying gold, according to World Gold Council data. China’s imports of gold bullion from Hong Kong however – regarded by many as proxy for overall imports – fell 10% in June compared to a month earlier, official Hong Kong government statistics published last week show.
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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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