London Gold Market Report
from Adrian Ash
BullionVault
Thurs 16 Feb., 09:45 EST
WHOLESALE MARKET prices to buy gold bullion slipped further on Thursday in London, falling to a three-week low beneath $1709 per ounce as a raft of positive US data buoyed the Dollar, and fresh rumors broke of a Eurozone exit for Greece.
Last night’s phone-conference of Euro politicians said that Greece must accept extra budgetary oversight if it is to get the extra bail-out funds to meet March’s critical bond-repayment deadline.
US crude oil prices meanwhile ticked near five-week highs at $101 per barrel. Silver prices fell 2.4% to hit the lowest level since 25 January around $32.70 the ounce.
The price to buy gold fell to £1090 per ounce for UK savers, but held above €42,300 per kilo for Eurozone investors as the single currency dipped below $1.30.
“Key gold support is in the $1706 area and resistance is at last week’s high around $1752,” reckons the latest technical analysis from bullion bank Scotia Mocatta.
“Market sentiment towards [buying gold] seems broadly bullish, but some large stops lurking above $1730 are helping to keep a lid on things,” says a London dealer.
More broadly, “As a whole gold is adopting a more prominent role in the financial system,” said the World Gold Council’s Marcus Grubb to MineWeb this morning, launching the market-development organization’s latest quarterly Gold Demand Trends report.
“Central banks are [now] a key part of this market. They bought 439 tonnes last year, which is a huge move on the demand side, but they also were leasing more gold into the market…largely [to raise cash for] adding liquidity to help the European banking system.”
Spying “no end currently to the woes of Greece and Italy,” the WGC’s new report says that “ongoing difficulties in the [single Euro currency zone] will further stimulate gold investment demand.”
Gold Demand Trends also shows China’s private demand overtaking world No.1 India in the fourth quarter of 2011, by holding equal with the last 3 months of 2010 by volume while India’s demand fell 42% to the lowest level since the global recession of early 2009.
France saw positive net gold investment in 2011 for the third year in a row, after being a consistent “dishoarder” for almost two decades.
Minting some 80 tonnes of gold coin, Turkey was the world’s top bullion mint once again, according to the WGC’s data.
On the economic front Thursday, new US jobless claims fell to a near 4-year low last week, new figures showed, while housing starts were also better than analysts forecast.
Excluding fuel and food, factory-gate prices in the US rose 3.0% year-on-year in January, compared with Wall Street estimates of 2.6%.
In contrast to US gold investment demand, which slipped 29% by value at the end of 2011, US demand to buy gold jewelry rose 12% in the last quarter compared with Christmas 2010, says the WGC’s report, reaching $2.3bn.
But “Household debt remains elevated by historical standards,” says a new report from the Federal Reserve Bank of Richmond, “and other determinants of consumer spending remain weak.”
Chinese households meantime grew their demand to buy gold jewelry 27% by value year-on-year, spending three times as much as did US consumers.
China’s physical gold investment demand rose 20% by value.
“It will probably take some time before investors in Hong Kong fully warm up to this [gold ETF] product,” writes UBS strategist Dr.Edel Tully, noting unimpressive demand for the city’s new exchange-traded gold trust, launched on Monday.
“One of the main appeals of gold in its key markets such as China and India is that it is a tangible, hard asset and easily accessible to retail consumers in physical form.
“The shift from gold coins and bars to an exchange-traded product may take some getting used to.”
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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 today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2012
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
The Greek deal delay continues to punish Euro today as well with the single currency going below 1.3000 levels. The pair continued the loss since the early Asian session and continued in European session to form a low of 1.2982. It is hovering around 1.3000 levels down about still down about half a percent for the day. The support may be seen at 1.2980 and below at 1.2950. The resistance may be seen at 1.3050 and above at 1.3090/3100 levels. The jinx of Greek deal is far from untangled. The next deadline for the deal comes next week.
When risk aversion increase hugely firmly endorsing the low-yielding dollar, who needs to see U.S. economic reports? Concerns on a possible Greece default dragged EUR/USD 125 pips from its 1.3192 intraday high, while USD/CHF also jumped by 29 pips to .9233.