London Gold Market Report
from Adrian Ash
BullionVault
Mon 8 Oct, 07:20 EST
WHOLESALE-MARKET prices to buy gold fell 0.5% to $1770 per ounce in Asian and London trade Monday, holding more than $25 below Friday’s new 11-month high as world stock markets also fell together with commodity prices.
Chinese traders wanting to buy gold saw the price fall sharply as the Shanghai futures market re-opened after the long Golden Week holidays.
Silver prices fell nearly 5% from last week’s new 7-month high against the US Dollar, hitting the lowest level in nearly two weeks.
“We are somewhat cautious on gold here,” says a note from commodity brokerage Intl FC Stone. “It has had a very good run higher over the past several weeks, while chart-wise, it looks like it could back away further from stiff resistance between $1790-1800.
“However, we still would look to buy gold on any substantial pullback, as it will likely be one of the prime beneficiaries of the massive easing policies we are seeing put through practically the world over.”
Monday saw both the Japanese and US financial markets closed for national holidays.
Last week saw a new record in the size of gold ETFs, with the volume of bullion held to back these stockmarket-traded trust funds swelling to nearly 2,570 tonnes according to Bloomberg data.
Speculators in the US gold futures and options market also raised their betting, taking their net long position (of bullish minus bearish positions) to its highest level since August 2011 at the equivalent of 941 tonnes.
So-called “small speculators” led the charge, raising their net long position as a group for the 7th week running to equal 195 tonnes – a series record according to official data from the CFTC regulator.
“The weekly uptrend remains in place” in Dollar gold prices, says the latest technical analysis from bullion market-maker Scotia Mocatta, “with support at $1613 and resistance at the all-time high of $1921.”
“Momentum was slower” last week in the growing gold futures’ position however, notes Standard Bank’s commodity team here in London.
“That indicates market participants are increasingly wary of adding length in this post-QE3 environment.”
Over in the commodity market Monday morning, crude oil lost more than 1% and base metals also fell hard after the International Monetary Fund cut its growth forecast for the East Asian economies.
Now predicting 7.7% growth for 2012 – down from May’s forecast of 8.2% – the IMF says next year will see growth of 8.1% rather than the previous prediction of 8.6%.
ANZ Bank meantime warns that slowing demand from China could see 1-in-3 of the 900-odd mineral projects now being planned in Australia put on hold.
Advertisements for new jobs in Australia have been declining for 6 months, ANZ research adds elsewhere, taking the total of vacant positions down 11% from a year ago.
“The big bogeyman in the closet is China and everyone is trying to guesstimate if it’s going to have a hard landing or a soft landing,” says Philippe Gijsels at BNP Paribas Fortis Global Markets in Brussels, speaking to Reuters.
China’s demand to buy gold is now the world’s second-heaviest after India. Together those two countries account for over 50% of annual consumption worldwide.
HSBC analysts today said China’s services sector grew sharply in September, rebounding from a 1-year low on the bank’s Purchasing Managers’ Index.
Those data are at odds however with Beijing’s official non-manufacturing PMI released last week, which showed the services sector of the world’s second-largest economy slowing to its weakest level in two years.
Meantime in Europe, finance ministers from the Eurozone states today gathered in Luxembourg for the first board meeting of the new €500 billion Stabilization Mechanism fund.
Spanish bond prices rose with German, French and Dutch government debt – nudging their interest rates lower. Italian bond prices slipped, raising Rome’s borrowing costs.
The Euro edged back beneath $1.30 as the US Dollar rose against all currencies bar the Japanese Yen.
Eurozone investors wanting to buy gold saw the price hold steady at €1367 per ounce, a level first touched in September 2011 that’s now 1.4% below last week’s new all-time record.
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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy 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.
Tradervox.com (Dublin) – The Japanese currency strengthened against most of its major peers after the Bank of Japan refrained from additional stimulus. The yen rallied from more than two weeks low against the dollar. The yen advanced against the euro as Mario Draghi indicated that the European Central Bank is waiting for the Spain to fulfill the requirements for bond buying. According to Minori Uchida, Tokyo-based Chief Analyst at the Bank of Tokyo-Mitsubishi, the market has been disappointed a bit by the BOJ’s inaction. The BOJ meeting was graced by Japan Economic Minister Seiji Maehara, who wanted to express his discontentment with the current exchange rate. Maehara is the first Minister in nine years to participate in the BOJ meeting.
Tradervox.com (Dublin) – Federal Reserve have been seen as shifting from its current strategy of tying monetary policy change to the calendar to linking it with specific economic conditions such as reduction in unemployment rate. In its September 12-13 meeting, the Fed extended its time horizon of keeping close to zero rates from late 2014 to middle 2015, which some members expressed their concerns that it would be construed as a downgrade on their economic outlook. Its decision to add stimulus has been met with resentment from several quarters with skeptics saying it will not achieve the desired results.
Tradervox.com (Dublin) – After adding 10 trillion yen to the existing asset purchases kitty last month, the Bank of Japan refrained from additional stimulus last week. The Japanese central bank held the asset purchases fund at 55 trillion yen as it kept the interest rate at near zero rates according to a statement it released last week after a two-day BOJ policy makers meeting in Tokyo. The Meeting, which was attended by the Economy Minister Seiji Maehara, was largely anticipated to make no changes to the monetary policy. However, the presence of Economy Minister is an indication of the government’s concern about the strengthening currency.
