London Gold Market Report
from Adrian Ash
BullionVault
Tues 10 Sept 08:50 EST
BENCHMARK London prices for physical gold fell to $1363 lunchtime Tuesday, down 2.3% from Monday’s high as the Assad regime in Syria accepted a Russian-backed plan to give its chemical weapons to international control.
The Rupee meantime rose to a 2-session high after new Indian trade data showed gold imports falling and exports rising in August.
Premiums in Asian markets, over and above London’s benchmark gold price, eased further from the early summer’s record levels.
Gold futures volume on the US Comex was only half its recent average on Monday, according to Reuters data.
Sterling’s continued strength above $1.57 took the gold price for UK investors to its lowest level since Aug.22 beneath £870 per ounce.
With the Dollar gold price also nearing 3-week lows, “New headlines about Syria remain the focus,” says one dealing desk in a note.
“The decline in the oil price is adding additional short-term resistance to gold,” adds Standard Bank’s commodity team.
Russian foreign minister Sergei Lavrov yesterday used an off-the-cuff remark by US secretary of state John Kerry to begin talks over UN inspectors taking control of the Assad regime’s chemical arsenal.
Today France drafted a resolution for the United Nations security council, warning Syria of “serious consequences” if it then fails to comply.
European stock markets rose sharply Tuesday morning, while crude oil and major government bonds fell.
Silver extended Monday’s drop to stand at $23.15 per ounce, 3.1% below last week’s finish.
New data from China showed a jump in retail sales, industrial output and urban investment last month.
“We see the latest price action as a correction of the uptrend which began on June 28th,” said a technical note on gold from Scotia Mocatta after Monday’s $10 drop.
“Support is at 1352, which is the low from August 20th…Resistance is at the recent high at 1433.”
Looking ahead to next week’s US Federal Reserve announcement, “Tapering to the tune of $10bn-15bn has in our view been priced in,” says a note from Bank of America-Merrill Lynch analysts.
“But if the Fed is more dovish than that, [meaning it] tapers by less or delays tapering entirely, gold prices could rally in the short term.”
“Short covering,” says analysis from Japanese trading house Mitsui, “was a major factor in the rebound of [both silver and gold] and this may now be running out of momentum.”
Noting a slowdown in sales of gold from exchange-traded trust funds, “There are still optimists out there who see value in gold and silver,” says Mitsui analyst David Jollie.
“We are not expecting a short-term return to the heavy selling seen in the first part of the year.”
New York’s giant SPDR Gold Trust – the world’s largest exchange traded gold fund – shed 2 tonnes of bullion on Monday, but held 8 tonnes above the four-and-a-half year lows of last month.
“In the event of the Fed tapering its programme of QE,” says a note from London market maker Deutsche Bank, “we expect gold returns are vulnerable to higher US real yields and a stronger US Dollar.
“Given our outlook of a further rebound in global growth we view silver and PGMs as the likely out-performers.
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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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