London Gold Market Report
from Adrian Ash
BullionVault
Monday, 29 July 08:45 EST
WHOLESALE GOLD prices reversed an overnight drop of $10 per ounce to trade above $1335 lunchtime Monday in London, gaining in what dealers called “very quiet” trade.
Silver also rallied from an earlier drop, adding 1.9% to trade above $20.10 per ounce.
Japanese stock markets fell hard as the Yen rose on the currency markets.
Commodities, European equities and major government bond prices held flat, with economists forecasting “no change” in either US Fed policy or the key language around reducing QE bond purchases in Wednesday’s monthly announcement.
“We expect the FOMC meeting and the US payrolls report will be the highlights this week,” says a note from commodity and investment analysts at Germany’s Deutsche Bank.
“A soft employment report would amplify the more dovish sentiment on [QE] tapering and sustain the cautious rebound in gold prices.”
“Gold has made a terrific recovery,” Bloomberg quotes $3 billion fund manager Donald Selkin at National Securities Corp. in New York, “but there’s not too much to the upside for now.
“People are going to wait and see what the Fed is going to do.”
Gold investment positions in exchange-traded funds “have continued to trickle lower,” notes Barclays in London, pointing to the 23% drop from end-2012’s record levels.
The giant SPDR Gold Trust shed another 5 tonnes last week, taking the bullion needed to back its shareholders’ investment to new four-and-a-half year lows below 928 tonnes.
Should gold slip back below $1300 per ounce, warns Barclays, “an additional 160 tonnes [of gold ETF positions] become loss-making.”
New gold ETFs traded for the first time in China today both slipped 1% in value as prices dropped.
Together, the Huaan and Guotai gold ETFs fell well over two-thirds short of their sponsors’ investment targets, raising less than $261 million between them.
Ahead of the coming US Fed and jobs data decision, hedge funds and other professional speculators raised their “net long” position on US gold futures to a 6-week high of nearly 180 tonnes in the week-ending last Tuesday, new data from US regulator the CFTC showed Friday.
Private investors, however – the so-called “unreportable” category of speculative gold futures traders – meantime cut their net long position almost to zero, with bearish bets very nearly equal to bullish contracts.
That position peaked at 195 tonnes equivalent in October 2012, just as gold prices began their descent from $1800 per ounce.
“Short positioning had become quite extreme,” says a note from Swiss investment bank and London gold market-maker UBS. So there has been “some scaling back, especially ahead of key risk events this week.
“Anticipation of the FOMC meeting on Wednesday and nonfarm payrolls on Friday is likely to deter large position-taking and result in more subdued market activity in the next few days.”
Over in India – currently world No.1 for gold demand, but set to be eclipsed by China this year – prices for gold rose sharply on Monday as what local dealers called a “massive shortage” of metal due to government import restrictions bit harder.
Indian premiums over and above international benchmarks hit up to $30 per ounce, Reuters reports, quoting Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation.
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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 and silver in Zurich, Switzerland for just 0.5% commission.
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