London Gold Market Report
from Adrian Ash
BullionVault
Fri 30 Aug 08:20 EST
The PRICE of gold fell $15 in London trade Friday morning, reversing the last of the week’s 2.5% gain to sit flat at $1395 per ounce.
Silver had already slipped, and then also fell hard as London opened for business, dipping below $23.50 per ounce.
Unlike the gold price silver then regained most of that drop to trade back at $23.70 – some 1.7% beneath last Friday’s finish.
“A delay in any military action in Syria has temporarily pushed demand for gold as a safe haven to the backburner,” says a note from Germany’s Commerzbank.
“My feeling,” says David Govett at brokers Marex Spectron, “is that without Syria [the gold price] would be sub-1400.
“[But] with that simmering in the background, the majority [of traders] are nervous of being short.”
After losing a key vote on Syria last night, British prime minister David Camerson said the UK will not join any action against the Assad regime over alleged chemical weapon attacks on civilians.
Just as the result was being announced in Parliament, a BBC team in Syria reported a fighter jeg dropping incendiary bombs on a school playground, causing “napalm-like burns” on scores of children.
“Any sign that the situation may be contained,” says Swiss bank and London market maker UBS, “will keep the focus on the macro picture for now.
“This remains challenging for the [gold price].”
Ahead of key US data on inflation and personal spending, major government bonds ticked lower in price, nudging interest rates higher.
Investors in major government bonds were heading for a fourth month of losses, Bloomberg reports, with US as well as Japanese, UK and Eurozone debt prices all falling in August.
US stock-market futures meantime pointed higher as European shares cut earlier losses. Commodity indices retreated 0.5% as US crude oil fell back towards $108 per barrel.
“There’s fear the Fed will cut stimulus [in September], while improving economic data in Europe is having a further upward effect on yields,” says Alain van der Heijden at the €1.4 billion Kempen Capital Management in Amsterdam.
But “I see the current [emerging market] turbulence leading to a renewed global recession,” counters Societe Generale strategist Albert Edwards, “with waves of deflation flowing to the west from Asia.”
Rather than tapering, “QE will be ramped up exponentially,” says Edwards, repeating his four-year call for a $10,000 gold price as “inflation is unlikely to be containable.”
Suffering a 20% drop in the Rupee since mid-July, India’s prime minister Manmohan Singh on Friday blamed “unexpected external developments”, and repeated that “clearly, we need to reduce our appetite for gold.”
Gold investment – primarily met through imports rather than domestic mine supply or recycling – accounted for 2% of GDP in the last fiscal year, the Reserve Bank of India said last week, down from 2.4% in the prior year.
Gold trading margins at the Multi Commodity Exchange will double on Monday to address volatility in gold futures, where prices this week hit fresh all-time highs.
Following Turkey’s lead in using household gold bullion deposits to boost national gold reserves, India is planning to launch “gold banking” soon, according to unnamed sources quoted by the press.
Reviewing the level of external debt amongt Asian countries, however, “I’m relatively though not totally calm,” writes Princeton economist Paul Krugman on his New York Times blog.
“Indonesia has a much lower debt ratio now, about half what it was in the mid-90s. India’s external debt level is [also] relatively low.”
Over on the supply side Friday, producers in world #6 miner South Africa said they’d received 48 hours notice of a strike over pay from the largest and government-aligned union, the National Union of Mineworkers.
“Our most important industry is in crisis and we have not yet found the answer to stemming the tide of destruction,” said a tearful Mark Cutifani, CEO of Anglo American, blaming “cowards, thugs and murderers” for a wave of violence across South Africa’s gold mining industry.
Now running Amplats as a division of Anglo, Cutifani said job cuts will be limited to 4,800 rather than the 14,000 previously targeted at the world’s #1 platinum producer.
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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 or Singapore for just 0.5% commission.
(c) BullionVault 2013
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