London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 27 November 2012, 07:30 EST
THE DOLLAR gold price fell below $1750 an ounce Tuesday morning, though it remained near to where it started the week, as stock markets recovered yesterday’s losses following news of a deal on Greece’s debt burden.
“We continue to be bullish so long as gold holds above the $1705 low from mid-November,” says the latest technical analysis from Scotia Mocatta.
Over in New York, the difference between bullish and bearish contracts held by Comex gold futures and options traders, the so-called speculative net long, rose for the second week running in the week ended last Tuesday, data published last night by the Commodity Futures Trading Commission show.
“Based on the rally across metals last week, that speculative length is most likely to have picked up substantially [since last Tuesday],” says Standard Bank commodities strategist Walter de Wet.
Comex gold options expire later on Tuesday.
“For calls, the bulk of open interest [OI] rests at the $1800 strike, with more than 3.2 million ounces,” says a note from UBS.
“With OI so high, could today be the day that gold gravitates closer to the much coveted $1800 level?”
Over in India, traditionally the world’s biggest source of private gold demand, the Rupee regained some ground against the Dollar Tuesday, but remained near two-month lows, with Rupee gold prices near two-month highs.
“There are no [gold] buyers at these levels,” says Mayank Khemka, managing director at New Delhi bullion wholesaler Khemka Group.
“There are a few investors who are selling and booking profits.”
Silver meantime also edged lower this morning, though it remained above $34 an ounce, as other industrial commodities were broadly flat.
Eurozone finance ministers agreed early on Tuesday to amend the timetable for reducing Greece’s debt-to-GDP ratio. Greece is now expected to bring the ratio down to 124% by 2020, up from the previous target of 120%. An additional target of “substantially lower than 110%” has been set for 2022, while by 2016 Greece should aim for an interim target of 175%.
International Monetary Fund chief Christine Lagarde called previously for there to be no movement in the deadline or target, arguing that instead Greece’s debt burden should be reduced by imposing further losses on creditors.
In addition, a Eurogroup statement referred to the possibility of Greece buying back some of its debt currently trading below par value, a measure Germany has advocated.
“If this is the route chosen,” the statement said, “any tender or exchange prices are expected to be no higher than those at the close on Friday 23 November 2012.”
The deal also included a possible reduction of the interest rate Greece pays on bailout loans, as well as a 10 year suspension of such payments, although these measures are subject to how much progress is made on reforms.
“The Eurogroup expects to be in a position to formally decide on the disbursement [of Greece’s next tranche of bailout funding] by 13 December,” the Eurogroup statement said.
On the currency markets the Euro edged lower against the Dollar Tuesday morning, as gold and silver also eased slightly in Dollar terms.
“Gold does not appear to be particularly impressed by last night’s agreement,” says this morning’s commodities note from Commerzbank.
“The budget balance and economic growth targets set in the program are very ambitious, and it is questionable whether they will actually be achieved. If not, the Greek debt problems could return to the spotlight more quickly than anticipated.”
Greece’s economy will shrink by 4.5% next year, following a contraction of 6.3% in 2012, according to the latest Economic Outlook published by the Organisation for Economic Cooperation and Development Tuesday.
“The monetary policy stance should be further eased in many economies,” the OECD report says.
“Additional easing is required in the Euro area, Japan and some emerging market economies, including China and India… excessive near-term fiscal consolidation should be avoided.”
The OECD has cut its growth forecasts for the UK, predicting a 0.1% contraction for 2012, followed by growth of 0.9% next year – down from 1.9% forecast back in May.
The second estimate of third quarter UK GDP published this morning confirmed the UK economy grew at 1.0% between July and September.
Britain’s chancellor George Osborne meantime unveiled his choice of successor to Mervyn King as Bank of England governor Monday. Osborne has appointed current Bank of Canada governor Mark Carney, describing him as “the best for Britain”. Carney will take over the role next July.
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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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