London Gold Market Report
from Ben Traynor
BullionVault
Monday 25 March 2013, 08:45 EST
U.S. DOLLAR gold prices fell back below $1600 per ounce Monday morning in London, falling
back towards where they started last week, as stocks and commodities gained after news that
Cyprus has agreed a bailout deal.
“We expect gold to move sideways this week with, however, a tendency for lower prices,” says a
note from precious metals refiner Heraeus, adding that it saw increased demand for investment gold
bars, with gold “much influenced by worries over Cyprus”.
“[Gold’s] price action remains well below the uptrend which was broken in February,” says the
latest technical analysis note from bullion bank Scotia Mocatta.
“There is a major base of support in the $1522 area, which will be pivotal to the long-run trend; the
risk is for a test of this low.”
Silver meantime dropped below $28.60 an ounce, while US, UK and German government bond
prices also fell.
Cyprus has reached agreement with international lenders over a €10 billion bailout deal. The
country’s second-largest lender Laiki will close, with shareholders, bondholders and uninsured (over
€100,000) depositors set to take losses.
The largest bank, Bank of Cyprus, will take over those assets of Laiki deemed viable. European
Union officials have said uninsured depositors at Bank of Cyprus should not lose more than 40%,
Bloomberg reports.
The deal also “safeguard[s] all deposits below €100,000 in accordance with EU principles,” says a
statement from the Eurogroup of single currency finance ministers. An earlier plan, unveiled a week
ago but rejected by the Cypriot parliament, would have imposed a 6.75% levy on deposits below
€100,000 and a 9.9% levy on those above that level.
“This solution…doesn’t have the downsides that the solution of last week did,” said Jeroen
Dijsselbloem, Dutch finance minister and Eurogroup chair, adding that the agreement now reached
was not one of the “political possibilities” a week earlier.
“The Cyprus situation is a dramatic situation but it was well managed,” reckons Dider Duret, chief
investment officer at ABN Amro Private Banking in Amsterdam.
“It has not turned into a big systemic fear. We’re not in the abnormal years of the big systemic risks
that we’ve seen with Greece or Lehman.”
The agreement means that the European Central Bank will not carry out its threat to cut off
Emergency Liquidity Assistance to Cyprus’s banks today as it warned it would do if there were no
deal and it had reason to believe banks were insolvent.
In the US meantime, the difference in the number of ‘bullish’ long minus ‘bearish’ short contracts
held by gold futures and options traders classed as noncommercial, that is managed money such
as hedge funds, rose 3% in the week ended last Tuesday, weekly data published Friday by the
Commodity Futures Trading Commission show. The rise took the so-called speculative net long
position to its highest reported level since November.
“The gold price rise in the period under review was supported by financial investors,” say analysts
at Commerzbank,”as a result of which short-term investors have evidently acquired greater
influence again.”
“The underlying moves also smacked of a keenly bullish attitude,” says a note from Standard Bank,
adding that short positions were unwound on aggregate while the number of long positions went
up.
Last month saw the number of short gold futures contracts rise to its highest level this century.
“The impact of recent events for Eurozone crisis-management ahead offers underlying support for
gold,” says UBS.
“The fragile situation in Europe combined with the recent display of vigor from physical demand
would make shorts think twice before moving as aggressively as they did last month.”
Over in India, traditionally the world’s biggest gold buying nation, “demand [for gold] is very thin”
one trader at a state-run bank told newswire Reuters this morning.
Gold value calculator | Buy gold online at live prices
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 can be found on Google+
(c) BullionVault 2013
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.
