London Gold Market Report
from Adrian Ash
BullionVault
Wednesday, 31 July 09:15 EST
The PRICE of wholesale gold fell back to $1320 per ounce Wednesday lunchtime in London as new data showed the US economy expanding faster-than-expected.
Second quarter GDP rose 1.7% in real terms from a year earlier, the Bureau of Economic Analysis said.
Inflation in consumer goods and services fell to 0.0%.
Falling almost $20 from an earlier 1-week high, the gold price at $1320 dropped back to its crash low of mid-April, when prices tumbled $250 per ounce in 3 sessions.
The US Dollar had today already jumped half-a-cent against both the Euro and Sterling – and driven the Brazilian Real to 4-year lows – after strong jobs growth was reported by the private-sector ADP Payrolls report.
Official non-farm payrolls data for July are due this coming Friday.
Ten-year US Treasury yields jumped Wednesday to 3-week highs at 2.66% as bond prices fell.
Washington’s creditors have now lost money for three months in succession, lagging world stock markets by well over 5 percentage points according to Bloomberg data.
“The influence real US interest rates have on gold has receded over the last few decades as demand has shifted from West to East,” says a new research paper from market-development organization the World Gold Council today.
The relationship between the gold price and real US interest rates, adjusted for inflation, “is less clear when viewed in the context of other fundamental factors,” the report goes on, pointing to movements in the US Dollar, equities, and gold-price volatility.
Gold in Dollars has rallied nearly 10% in July after losing 25% to hit 3-year lows over the April-June quarter.
Versus Euros and Sterling, gold this month added more than 6%.
Silver meantime failed to break back above $20 per ounce Wednesday morning, holding 5.6% higher for the month of July on the London Fix but then slipping back to $19.44 after the US data.
Over in India, “We hope to contain gold imports at a level well below last year’s total imports,” said finance minister P.Chidambaram on Wednesday.
Imposing yet more new restrictions on gold importers in July – and already doubling Indian premiums over world benchmark gold prices – “[That will] save considerable amount of foreign exchange,” says Chidambaram, “which will have a positive impact on the current account deficit.”
Investment bank and bullion dealer Standard Bank of South Africa was meantime reported by a source to be close to selling its London commodity trading business to China’s giant ICBC bank.
Standard’s largest shareholder, ICBC was recently ousted by the US Wells Fargo as the world’s largest bank by stock-market value.
“Institutional investors in the Western Hemisphere [have] revealed strong negative feelings towards gold,” says a note from London market maker UBS.
“In contrast, retail investors in Asia – who account for the bulk of physical buying – have found good value in this year’s lower gold prices.”
US hedge-fund manageer David Einhorn was quoted Tuesday telling clients that his bullish view on gold “has not changed” and that Greenlight Capital continues to split its exposure equally between physical gold bullion and mining stocks.
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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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