London Gold Market Report
from Ben Traynor
BullionVault
Tuesday 7 February 2012, 07:45 EST
U.S. DOLLAR gold prices touched a 2-week low of $1711 an ounce Tuesday lunchtime in London, with stocks, industrial commodities and the Euro also falling amid uncertainty over whether Greece is approaching default.
Silver prices dropped to $33.20 per ounce – down 1.6% on the start of the week.
“The $33.00 level [is proving] to be strong support,” says the latest technical analysis note from bullion bank Scotia Mocatta.
Gold prices Tuesday lunchtime remained more than 3% above where they were on January 25, the day the US Federal Reserve revealed its policymakers expect near-zero interest rates to persist until at least the end of 2014.
The Fed announcement “put an end to the correction in gold,” reckons Mark Arbeter, chief technical strategist at S&P Capital IQ.
France and Germany have suggested that part of the €130 billion second bailout for Greece be set aside to pay Greece’s creditors, with Greek leaders yet to agree to austerity reforms required by the so-called troika of international lenders, the European Central Bank, European Union and International Monetary Fund.
“We want Greece to stay in the Euro,” German chancellor Angela Merkel told a press conference in Paris on Monday.
“But I also say there can be no new Greek program if agreement is not reached with the troika…all those who bear responsibility in Greece must know we will not deviate from this position.”
The lack of agreement among Greek leaders over how to reduce public spending has led to the postponement of a Eurozone finance ministers meeting scheduled for this week, at which the new bailout was to be finalized, the Financial Times reports.
“I honestly can’t understand how additional days will help,” Merkel said yesterday.
“Time is of the essence. A lot is at stake for the entire Eurozone.”
European Commission vice president Neelie Kroes however has played down the implications of Greece leaving the Euro.
“[Politicians] always said if a country is let go or asks to get out, then the whole edifice will collapse,” she told Dutch newspaper Volkskrant.
“But that is simply not true.”
Citi economists Willem Buiter and Ebrahim Rahbari see the likelihood of Greece exiting the Euro – which they term ‘Grexit’ – as “50% over the next 18 months”.
“The implications of Grexit for the rest of the Euro Area and the world would be negative, but moderate, as exit fear contagion would likely be contained by policy action, notably from the ECB.”
“Greece is sitting right on the edge of default,” adds Standard Bank currency analysts Steve Barrow, “with Portugal possibly not too far behind.”
“It is still possible to avoid a disorderly default,” insists one unnamed senior European official quoted by the FT.
“[However] the delays have been damaging [and] have dangerously increased the degree of uncertainty, and they are entirely due to the Greek side.”
“The problem today,” countered Greek socialist Pasok party spokesman Panos Beglitis on Monday, “is the depressing imposition of Germany’s strategy on the Eurozone. Nobody is listening to us. We are lonely.”
Greek trade unions have called a 24 hour strike today. There were disturbances in Athens, where riot police fired tear gas at protesters.
“My timeline says a German flag has been set alight outside the Greek parliament,” reports Greek Dow Jones journalist Matina Stevis on her Twitter account.
“As ever, the ongoing uncertainty would keep gold prices underpinned,” said a note from VTB Capital this morning.
Here in London, FTSE-listed Glencore, the world’s largest stock market-listed commodities trader announced today it has completed its merger with mining giant Xstrata in a $90 billion deal.
China’s gold imports from Hong Kong meantime rose 260% in 2011, according to new data from the Hong Kong Census & Statistics Department on Tuesday.
Rising to a record 428 tonnes, last year’s total was greater than China’s domestic gold mining production – itself a new record, and the world’s largest national output. Today’s news most likely puts total Chinese gold bullion demand for 2011 at well over 800 tonnes.
World number one consumer India imported some 878 tonnes in 2011, according to the Bombay Bullion Association.
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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.
(c) BullionVault 2011
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