London Gold Market Report
from Ben Traynor
BullionVault
Thursday 18 October 2012, 07:45 EDT
SPOT MARKET gold bullion prices fell towards $1740 per ounce Thursday lunchtime in London, 0.8% down on the week so far, while most European stock indexes also ticked lower ahead of today’s European leaders’ summit in Brussels.
“While [gold] holds below $1758 the risk is to the downside,” says the latest technical analysis report from bullion bank Scotia Mocatta.
“The path of least resistance for gold appears to be lower,” agrees HSBC analyst James Steel.
“Institutional investors give the impression of losing enthusiasm for another challenge of gold’s $1790-1800 price levels.”
Like gold, silver bullion dipped towards the end of London’s morning trading, trading lower towards $33 an ounce. Other industrial commodities were broadly flat on the day, while US Treasury bonds gained.
China’s economy grew by 7.4% in the year to the third quarter – down from 7.6% in Q2 and the seventh successive quarter of slower growth – according to official GDP figures published Thursday.
“The economic situation in the third quarter is relatively good and we have the confidence to say that the Chinese economy is showing signs of stabilizing and will continue to show positive changes,” Chinese premier Wen Jiabao said Wednesday ahead of the release.
Wen warned however that “China still faces considerable difficulty in the fourth quarter.”
“Our economic growth still faces a very challenging external environment as it is extremely difficult to expand external demand,” Wen said, “[but] our resolve to stabilize the economy is very firm.”
“It might take another couple of quarters for growth to significantly recover, “says Bank of America Merrill Lynch economist Lu Ting, “but we believe the risk for a hard landing is getting increasingly smaller.”
Here in Europe, European Union layers have advised that plans to grant banking supervisory powers to the European Central Bank may be in breach of EU treaties, according to draft documents leaked to reporters.
The plans, which will be discussed by European Union leaders at the two-day EU summit starting today, would see the ECB take on supervision of all Eurozone financial institutions.
The EU lawyers’ conclusion, the Financial Times reports, is that “without altering EU treaties it would be impossible to give a bank supervision board within the ECB any formal decision-making powers”.
Non-Euro members that opt into the supervision regime would thus be unable to vote on ECB decisions, with the supervisory board merely giving recommendations to the Governing Council.
Spanish borrowing costs meantime fell at an auction of 10-Year bonds this morning, amid speculation that the government is on the verge of asking for a bailout, which would enable the ECB to buy its bonds on the secondary market under its Outright Monetary Transactions program.
“The market is still looking for the timing of the aid request,” says Harvinder Sian, rate strategist at RBS, speaking before the auction.
“The danger is that if the market continues to rally the Spanish government holds off [requesting a bailout].”
Over in Greece, unions have called another general strike today to coincide with the start of the EU summit, with protesters once again taking to the streets of Athens.
Cyprus meantime has had its credit rating pushed further into junk territory by Standard & Poor’s, which now rates the country’s debt at B. Cyprus too is widely expected to seek a bailout soon.
In South Africa, the world’s fifth largest gold bullion producer Gold Fields is set to fire 11,000 workers for taking strike action, Reuters reports. Gold Fields said yesterday that a strike at some of its Beatrix shafts has ended, but that other sites are still being affected by industrial action.
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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. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+
(c) BullionVault 2012
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