London Gold Market Report
from Adrian Ash
BullionVault
Tues 3 Sept 09:05 EST
WHOLESALE London prices for physical gold jumped $15 from a drop to $1384 per ounce Tuesday morning, gaining after the Interfax news agency in Russia – political ally of Syria’s President Assad – reported two “objects” being fired in the Mediterranean, towards the sea’s eastern coast.
The gold price then fell back only to rise and touch $1400 for the first time this week – 2.5% below last Wednesday’s 3-month high – as Israel confirmed the launch, saying it was done to test what Reuters calls a “US-funded” anti-missile system.
“As long as Syria stays quiet, I would rather sell rallies [in the gold price] at the moment,” says David Govett at brokers Marex.
But “we would also expect the metal to find support on pull backs,” says Walter de Wet at Standard Bank in London, “not only because Asian demand is likely to improve with gold below $1400, but also because geo-political risk around Syria remains high and oil prices elevated.
“This may also keep ETF liquidation at bay.”
Western investors sold exchange-traded gold funds heavily in the first half of 2013, leading gold ETFs to shed 650 tonnes of bullion.
Holdings have since stabilized some 25% below end-2012’s record levels.
Over in Asia and the Middle East notes Commerzbank’s commodity research team, “Physical gold buyers who had hugely stepped up their purchases after the price collapsed in the spring, appear to be acting opportunistically and with great price sensitivity.
“In the wake of the latest price rise, it seems that they have withdrawn again,” says the German bank, pointing to August’s drop in US gold coin sales, plus today’s news of a 7-month low in Turkey’s gold bullion imports.
Reviewing last week’s pop above $1430 per ounce as the UK and US debated immediate action against Syria’s Assad regime for an apparent chemical weapons attack on civilians, “If air strikes take place gold could well fall,” writes Jonathan Butler at Mitsubishi, “and if this takes place against a backdrop of QE tapering, the downwards correction could be sharp.”
The US Federal Reserve is widely expected to announce a reduction of its $85 billion-per-month QE program at its policy meeting in two weeks’ time.
Meantime, the gold price “should be well supported in the coming days,” says Butler. “But Friday’s US payroll data may be negative for gold, however.”
Asian stock markets rose overnight, with Japan’s Nikkei adding 3% and the Shanghai index now regaining half of June’s 15% plunge after new data indicated lower new order for China’s manufacturers, but strong expecations for the future.
European stock markets held flat overall. Both the Euro and Sterling slipped against the Dollar.
Ten-year US Treasury yields rose to 2.84% as bond prices fell. Brent crude oil added 0.7% to rise above $115 per barrel.
Silver bullion meantime rose further above $24 per ounce, reaching 4-session highs some 5.7% above Monday morning’s early low.
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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.
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