London Gold Market Report
from Adrian Ash
Mon 18 Nov 08:35 EST
LONDON prices for gold reflected subdued dealing Monday lunchtime as silver and other commodities also dropped but major government bond price edged higher.
European shares drifted lower as well, but the MSCI World index was pulled up to 6-year highs by a sharp rise in Chinese equities.
Prices ended the day on the Shanghai Gold Exchange unchanged in the Chinese Yuan, holding at a $3.90 premium per ounce to the world’s benchmark quote for London settlement.
Silver fell 1.3% to $20.54 per ounce before ticking higher in line with gold.
“With no significant impulses expected,” says the latest weekly update from refining group Heraeus, “we foresee a sideway movement in a range of $1280-1295 for the next few days.”
“Overall this is a sideways environment,” agrees bullion market-maker ScotiaMocatta’s head of precious metals Simon Weeks, speaking to Reuters.
“Prices are likely to trade within a range in the near term,” says Barclays analyst Suki Cooper, noting that “a potential pick-up in Chinese buying ahead of Chinese New Year may provide some support on the downside.”
Looking at last week’s dovish testimony on 2014 Federal Reserve policy from likely chairwoman Janet Yellen however, “Gold has been presented with a number of catalysts over the past year and in particular over the past two months, all of which have failed to reignite investor demand,” Cooper adds, noting that in the US Comex gold futures and options market, latest data show “the most aggressive reduction in positioning since March 2012.”
In the week-ending last Tuesday, the “net long” of bullish minus bearish bets held by speculative players fell 25% to a 4-week low, new data from regulators the Commodity Futures Trading Commission showed late Friday.
As a group, non-industry players in gold futures and options raised the size of their short positions by 60% to the highest level in 3 months.
“The ratio of the longs to shorts” amongst those speculators “was at 1.79 the lowest since mid-August,” says analysis from ANZ Bank.
Across 17 other commodities contracts, notes Bloomberg, the net long position (of bullish minus bearish bets) fell 12%.
“People were feeling very bearish before Yellen’s statement,” the newswire quotes Donald Selkin, chief market strategist at the $3 billion National Securities Corp. in New York.
“Her comments were dovish and can be seen as a postponement to tapering, which is definitely helpful for gold. But the main reasons why gold has fallen are intact. Inflation is low, and equity markets continue to march ahead.”
Wednesday this week brings US consumer price inflation data for October, expected to slip to 1.1% annually.
But after the US Federal Reserve failed to “taper” its quantitative easing of $85 billion per month as expected in September, “It’s unlikely that [current chairman] Bernanke will do anything at his last meeting if he perceives that his successor would prefer to leave policy unchanged,” says Nic Brown, head of commodities research at French investment bank and London bullion dealer Natixis.
“The Dollar may drop back…potentially positive for gold in the very short term.”
But “There are hardly any strong views out there at the moment,” says a note from Swiss investment bank and London bullion market maker UBS.
“Instead, there is a lot of nervous, defensive trading as investors strive to either protect [year-to-date] profits or avoid losses as we head closer into year-end.”
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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 fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.
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