London Gold Market Report
from Adrian Ash
Fri 22 Nov 08:45 EST
FOUR-MONTH lows in gold continued vs. the Dollar and Euro in London on Friday, with the metal heading for its lowest weekly finish in British Pounds since early August 2010.
World stock markets rose meantime, extending 2013’s 30% gain on the MSCI index, as did commodities and government bond prices, after the Dow Jones index in New York ended last night above 16,000 for the first time.
“People are finding it hard to find a reason to own gold,” the Wall Street Journal quotes one analyst today.
“Precious metals markets,” says David Govett at brokers Marex Spectron, also speaking to the WSJ, “are out of favor with investors and set to stay that way,”
Silver tracked gold’s Dollar-price drop of 3.6% to $1245 this week, failing to hold a rally above $20 per ounce lunchtime Friday.
Averaging 14% annual gains since 1999, the Sterling gold price has so far dropped 25% in 2013, dipping below £770 per ounce overnight.
New data from the International Monetary Fund meantime showed central banks as a group adding slightly to their gold reserves in October.
Turkey led the rise, with nearly 13 tonnes being added – most likely by commercial banks putting more client property on deposit, as part of their liquidity reserves – to the country’s previous holdings of 491.
Germany sold 3.4 tonnes from its 3,391 reserves, again for production of gold coin.
The United States added 33 kilograms, the largest change to its world-leading 8,133-tonne hoard since the 840kg added in the third quarter of 2012.
“Our bullish view has proven incorrect,” said Bank of America-Merrill Lynch technical strategist MacNeil Curry on Thursday, pointing to the drop through $1251 per ounce.
Whilst $1270 will now “limit the topside,” his chart analysis says, “bears need a break [below] $1155 and $1087 to confirm a long-term top and secular turn in trend from bullish to bearish.”
Targeting averaging prices of $1150 per ounce across the second quarter of 2014, TD Securities’ analyst Mike Dragosits says “Spec positioning” in the futures market “could also precipitate an overshoot, with gold hitting sub-$1000/oz on an intraday basis.”
Speculative traders in the US gold futures market have this year built the biggest “short” bet against prices since the bear-market lows of 1999.
“We will continue to watch Comex specs activity as a major contributing driver for this move,” says TD’s note.
Gold prices in India, formerly the world’s No.1 consumer but now overtaken by China, pushed higher above international benchmarks Friday, reports Reuters.
“Premiums are still on the higher side at about $120 per ounce,” the newswire quotes All India Gems & Jewellery Federation chairman Haresh Soni.
Thanks to the Indian government’s strict anti-gold import rules, aimed at cutting the country’s large trade deficit, “Still there is scarcity of gold,” Soni adds. “This problem will continue for another 5-6 months till the elections.”
Physical gold will meantime be traded between China’s biggest banks in formal “swaps” contracts starting Monday, the National Interbank Funding Center said today.
Used by large gold owners and traders to raise cash, and with a small rate of interest typically offered to borrowers as an incentive, gold swaps hit the headlines in 2010 after European central banks were identified as the source of 349 tonnes swapped with the Bank for International Settlements during the 1st half of the year, raising cash amid the growing Eurozone debt crisis.
Announcing a raft of reforms this week after the 3rd plenum of the current politburo, policymakers in Beijing have put China’s gold-market liberalization at the heart of financial deregulation.
US derivatives exchange the CME yesterday cut the margin payments needed to trade gold and silver futures contracts, halving the sharp hike made in June as prices ended their worst quarterly drop in three decades.
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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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