Traders Own

Wholesale gold bullion prices hovered just below $1370 an ounce for most of Wednesday morning's London trading, after a "surprise" drop the day earlier, with stocks and commodities also broadly flat this morning ahead of the US Federal Reserve policy announcement later today.

 

Silver meantime traded around $21.70 an ounce, 1.8% down on where it started the week, as US Treasury bond prices dipped.

 

On the currency markets the Euro and the Pound continued to trade near four-month highs against the Dollar, close to $1.34 and $1.56 respectively.

 

A day earlier, gold in Dollars hit a one-month low at $1361 an ounce, a level first passed on the way up in September 2010 and more than 2% down on where it started the week. Euro and Sterling gold prices both hit fresh two year lows at €1016 an ounce and £871 an ounce respectively.

 

"[Tuesday's move] was in thin volume and caught the market slightly by surprise, exaggerating the move somewhat," says David Govett, head of precious metals at broker Marex Spectron.

 

"There was no particular driver for it, just a weary market being taken advantage of."

 

"Gold remains under pressure in the run-up to today's Fed meeting," says this morning's commodities note from Commerzbank.

 

As well as announcing its latest monetary policy decision, the Fed will also publish its policymakers' latest economic projects later today. This will be followed by a statement and press conference.

 

European stock markets were little-changed on the day by Wednesday lunchtime in London, a day after US stock markets posted gains. Since the start of 2013, the S&P 500 is up nearly 16%, on course for its best first half of a year since 1997.

 

"The recent strength in stocks is attributable to investor expectations that although the Fed may start to signal that it is ready to start its 'tapering' policy [of slowing the pace of quantitative easing asset purchases]...stocks may still benefit, since interest rates, although rising, will still remain fairly uncompetitive," says a note from INTL FCStone metals analyst Ed Meir.

 

"Of course, if the Fed says that the economy remains too weak to be abandoned and decides to stand pat, these calculations will change and we could see a rather sharp correction in stock prices with a corresponding rebound in both bonds and gold."

 

"Why would they possibly rush to a taper now?" asks UBS economist Drew Matus.

 

"Unemployment is still nowhere near what they consider to be the natural rate, and the inflation number is too low."

 

US consumer price inflation rose to 1.4% last month, figures published yesterday show, up from a 53-year low of 1.1% in April. The official unemployment rate meantime ticked higher to 7.6% in May. The Fed has previously said it sees exceptionally low interest rates as appropriate while the unemployment rate remains above 6.5%.

 

"Should the [Fed] not come any closer to giving greater clarification on the asset-buying program," adds HSBC chief commodities analyst James Steel, "then the gold market could rally and investors who have been shorting gold in anticipation of a Fed move away from QE may have to cover...this could prompt a challenge of the $1400 an ounce level."

 

"US interest rates will rise over time and only the volatility of this move is in question," says Standard Bank currency strategist Steve Barrow.

 

"This normalization period will see bouts of volatility however well the Fed flags its intentions. The global economy and its financial markets have gorged themselves on the Fed's monetary largesse for many years; draining the punchbowl is bound to spark some fear and panic however the Fed does it."

 

Outgoing Bank of England governor Mervyn King meantime was one of three Monetary Policy Committee members who voted for more QE at the MPC's monthly policy meeting earlier this month, with six members voting against, minutes published Wednesday show.

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Gold drifted to a one-week low below $1380 an ounce Tuesday morning, as silver dipped below $21.80 an ounce, with stocks and commodities broadly flat on the day ahead of tomorrow's US Federal Reserve decision, with analysts speculating on whether the Fed will give details of when and how it might slow down its quantitative easing program.

 

"The outlook for the gold price remains negative from a technical perspective," says Karen Jones, head of FICC technical analysis at Commerzbank.

 

"Following the mid-April plunge, the market has consolidated tightly sideways in a converging range. We are viewing this as a potential symmetrical triangle. A close below $1352 will complete the pattern and trigger another leg lower we suspect."

 

"We believe that the dramatic gold sell-off in April," adds a note from Societe Generale, "combined with the prospect of the Fed starting to taper its QE program before year-end, has resulted in a paradigm shift in many investors' attitude towards gold. This is likely to result in continued large-scale gold ETF selling this year and next."

 

The SPDR Gold Trust (ticker: GLD), the world's largest gold exchange traded fund (ETF), has seen outflows this year amounting to a quarter of the gold it held to back its shares at the start of January.

 

In Washington, the Federal Open Market Committee begins its latest two-day monetary policy meeting today, with a decision due tomorrow.

 

"[There is] much speculation as to whether [the FOMC] will detail an exit strategy [from QE]," says a note from Dutch bank ING.

 

"While there are views that the Fed will want to see bond yields lower, or certainly highlight that policy rates will not be raised for a significant period, we see merit in the view that transparency is the best policy choice – and it is time to more formally outline the normalization process."

 

ING also argues that Fed policy uncertainty "has seen soaring volatility destroy the carry trade", whereby investors could borrow cheaply in Dollars to invest in emerging market assets.

 

Fed chairman Ben Bernanke meantime has stayed in his job "longer than he wanted" and has "done an outstanding job", according to US president Barack Obama, speaking in an interview broadcast Monday.

 

Over in the UK, consumer price inflation rose to 2.7% last month, up from 2.4% a month earlier, figures published Tuesday show. Mervyn King steps down as Bank of England governor at the end of this month. For the 120 months of his tenure, inflation has been above the Bank's target in 84 of them.

 

Over in India, the world's biggest gold buying nation, the authorities "are not at the end of our wits as far as gold imports are concerned," economic affairs secretary Arvind Mayaram said Monday.

 

"If required, there are other measures that can be taken and they will be considered at the appropriate time."

 

India has raised import duties on gold twice this year – taking them to 8% - and has also restricted imports of gold on a credit basis to only those who will re-export it. Gold and silver was India's second biggest import item last year and has been cited as a major contributor to the country's current account deficit.

 

Over in China, the world's largest stock market-listed jewelry chain Chow Tai Fook today reported a 13% drop in profits for the year to March, a filing with Hong Kong's stock exchange shows. The company cited "declining confidence of domestic consumers" as a factor behind the fall in profits.

 

Sales of silver bullion American Eagle coins by the US Mint meantime are set to record their best first-half-of-a year since at least 1986 – the year from which US Mint sales data start – with over 24 million ounces sold so far this year.

 

CME Group's new 1000 ounce silver futures contract saw 25 lots of the September contract traded in its first day of trading yesterday, with 5 lots of the December contract traded. By comparison, volume for the standard 5000 contract was 11,028.

Ben Traynor

BullionVault

(c) BullionVault 2013

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 US dollar gold price drifted back below $1390 an ounce Monday morning in London, but remained well within its trading range of the last few weeks, as European stock markets edged higher, with analysts citing Wednesday's Federal Open Market Committee decision on US monetary policy as "the big driver" for this week.

 

"On the whole, the market hopes for insightful comments in the course of the next Fed policy meeting...which will affect gold's further development as well," says a note from bullion refiner Heraeus.

 

Any so-called 'tapering' of the Fed's $85-billion-a-month quantitative easing program "would be bearish for gold and the other precious metals" says Jonathan Butler, precious metals strategist at Mitsubishi in London.

 

On the New York Comex, the so-called speculative net long position in gold futures and options – calculated as the number of 'bullish' long minus 'bearish' short contracts held by traders classed as speculators – fell in the week ended last Tuesday, according to Friday's weekly Commitment of Traders report from the Commodity Futures Trading Commission.

 

Silver meantime edged back below $22 an ounce, as other industrial commodities were broadly flat on the day, while on the currency markets the Euro held steady against the Dollar above $1.33.

 

For silver futures, the number of short contracts held by those in the Managed Money category – which includes hedge funds and other money managers – was slightly larger than the number of long contracts, CFTC data show. The last weekly reports to show money managers betting on aggregate against the silver price were published in April – prior to that no managed money net short silver position had been published since September 2007.

 

"Silver has been trying in vain to regain the $22 per troy ounce mark...[but] the high level of pessimism among money managers is putting pressure on the price," says today's commodities report from Commerzbank.

 

The world's biggest gold exchange traded fund SPDR Gold Trust (ticker: GLD) saw the volume of bullion held to back its shares hold steady at 1003.5 tonnes Friday, though it ended last week down 3.6 tonnes. The GLD has seen outflows amounting to one quarter of the gold it held at the start of this year.

 

Despite this, the GLD's biggest holder, hedge fund Paulson & Co., says it has no intention of closing its Gold Fund, news agency Bloomberg reports, citing a letter to investors it has obtained.

 

"While gold continues to pivot between negative investment appetite, which has slowed, and softer physical demand, this week the market focus will shift to the FOMC meeting and press conference," a note from Barclays says.

 

"The markets are a little bit fatigued at the moment," agrees Victor Thianpiriya, commodities analyst at ANZ. 

 

"They are still looking for direction from the Fed meeting. That's clearly the big driver this week."

 

Over in China meantime, Huaan Asset management, one of two physically-backed gold ETF providers to be approved by the China Securities Regulatory Commission, has said it aims to attract $400 million of initial funding – equivalent to around 9 tonnes at current prices – though no launch date has yet been announced.

 

"Gold hasn't lost its appeal as a store of value in China," says fund manager Xu Yiyi, who will run the Huaan ETF.

 

"Investors here usually like to buy on dips, so a decline in the bullion prices this year should work in our favor."

 

Over in India, the only country with stronger gold demand than China last year, gold and silver imports amounted to $8.4 billion last month, a 90% year-on-year rise, though this was down from April's 138% annual rise, a trade ministry official said Monday. India's trade deficit meantime widened from $17.8 billion in April to $20.1 billion last month.

 

Gold and silver prices fell sharply in April, prompting a spike in physical gold demand, while Indian importers were also reported last month to be looking to get ahead of new regulations. Earlier this month, Indian authorities raised the import duty on gold to 8%, the second hike this year, and also curbed imports on a consignment basis.

 

In Northern Ireland meantime the conflict in Syria and tax avoidance are expected to be two of the major topics discussed by world leaders meeting for the G8 summit.

 

In Iran, outgoing president Mahmoud Ahmadinejad has been summoned to appear before a criminal court, the Washington Post reports, following the election Sunday of his successor Hasan Rohwani, a reputed moderate who won 51% of the vote.

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Wholesale gold bullion prices continued to hover near $1380 an ounce Friday, while silver traded either side of $21.80 an ounce and stocks and commodities ticked higher, regaining some of the ground lost this week.

 

Heading into the weekend, gold was trading almost exactly where it started the week by Friday lunchtime in London, with silver also little changed.

 

"It has been a week of nothingness and I doubt today will be a lot different," says this morning's bullion note from brokerage Marex Spectron.

 

"Continue to watch the Dollar for direction and with a few [economic] figures, albeit not particularly big ones, out this afternoon, that should be good for a few silly Friday afternoon moves."

 

A survey of 36 gold market analysts by news agency Bloomberg found half of them expect gold prices to fall next week, with 14 saying they expect gold to go up and four saying they were neutral.

 

"Sentiment is very bleak," says VTB Capital commodity strategist Andrey Kryuchenkov.

 

"Investors are basically on the sidelines. They don't want to do anything and are still spooked."

 

"The downtrend that we see in the gold price is likely to continue," adds Dominic Schnider, head of commodity research at UBS Wealth Management Research.

 

The world's biggest gold exchange traded fund SPDR Gold Trust (ticker: GLD) meantime saw outflows of 6.3 tonnes yesterday, taking total bullion holdings to back its shares to its lowest level since February 2009.

 

US Federal Reserve policymakers meeting next week will seek to convince investors that they will move slowly in unwinding the Fed's stimulus measures such as its quantitative easing bond-buying program and record low interest rates, according to the Wall Street Journal's Jon Hilsenrath, dubbed 'Fedwire' by some fellow journalists owing to his perceived closeness to sources at the central bank.

 

"The chatter about pulling back the bond program has pushed up a wide range of interest rates and appears to have investors second-guessing the Fed’s broader commitment to keeping rates low," Hilsenrath writes.

 

"This is exactly what the Fed doesn't want."

 

Hilsenrath predicts that Fed chair Ben Bernanke will reiterate his message that there will be a "considerable" lag between the end of QE and the raising of benchmark interest rates.

 

"We are not sure if the two stances are mutually exclusive," says INTL FCStone metals analyst Ed Meir.

 

"Even if the Fed pares its buying program on the long[er term] end, there will be pressure on short-term rates to rise as well, meaning that the Fed could easily get sucked into intervening once again."

 

Over in China, the world's second-biggest gold buying nation, the government failed to sell all its bonds at an auction Friday, the first time this has happened in nearly two years.

 

"Tight liquidity is the main cause for the ministry's failure to complete the bond sale today," a senior trader at China Gunagfa Bank tells the Wall Street Journal.

 

"The high funding cost in the interbank market has made such investments even less popular."

 

"If liquidity is so tight that it is even difficult for government to raise funds, it'll be even more difficult for local governments and highly leveraged companies," adds Nomura economist Zhang Zhiwei.

 

China's central bank, the People's Bank of China, has refrained from large-scale injections of cash into the markets in recent weeks, a move that it has used at times of market stress in the past in order to ease liquidity constraints. 

 

"Now the market believes the PBOC is unlikely to change its recent hardline stance," one senior trader at a Chinese state-owned bank tells newswire Reuters, "at least for the third quarter."

 

The United States meantime has said it will give military aid to rebels in Syria and is considering enforcing a no-fly zone, after US intelligence confirmed to the Obama administration that Syrian government forces have used chemical weapons

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Gold prices rose as high as $1394 an ounce during Wednesday's Asian trading, before easing back by lunchtime in London, as European stock markets also fell, following selloffs in the US and Asia.

Silver dropped back below $21.90 an ounce after briefly touching $22, while other commodities were also down on the day.

"The trend is still bearish [for gold and silver]," says technical analysts at Scotia Mocatta.
 

Japan's Nikkei 225 fell 6.4% Thursday, taking the index down to more than 20% below last month's five-year high, and thus fulfilling a common definition for a bear market. Thursday's fall comes two days after the Bank of Japan decided not to announce any additional stimulus measures at its policy meeting.

"There's a global selloff in risk assets," says Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors in Sydney.

"Short term there was froth and that needed to come out, especially in Japan."

Emerging market stock indices have also been hit in recent weeks, as have emerging market bonds

"Safe assets are not entirely safe anymore," says Jeffrey Shen, head of emerging markets at the world's biggest asset manager BlackRock.

"There's nowhere to run and nowhere to hide," agrees Jack Deino, senior money manager who overseas emerging market assets at Invesco in New York.

"There's been just a lot of money out there looking for yield. Part of the selloff is attributable to the [potential] pulling back of [Federal Reserve quantitative easing], and you can't do anything about that."

The Dollar meantime has lost ground against major currencies since the start of June. The Euro has rallied to touch a four-month high above $1.33 this morning, nearly 3% up on the month. The Pound is up 3.1% on the month at just below $1.57, while the Dollar has also lost ground against the Yen, falling to ¥94 to the Dollar this morning, down from last month's five-year high of ¥103.

The Dollar's depreciation in recent weeks has broadly coincided with falls in global stock markets, with the Dollar having strengthened during much of May as stocks also gained. The 30-day correlation between the US Dollar index and the S&P 500 rose to its highest level since October 2008 at the end of last month, Bloomberg reports, arguing that this is "a sign that traders are gaining confidence in the sustainability of the US recovery".

"The way the Dollar is trading relative to risk is totally different [to its behavior in recent years]...the whole nature of the Dollar as a funding currency is breaking down," says Jen Nordvig, global head of foreign exchange strategy at Nomura Securities in New York, referring to a phenomenon whereby traders have taken advantage of low US interest rates to borrow in Dollars to buy high yielding assets elsewhere.

Over in India, traditionally the world's biggest gold buying nation, imports of gold have "come down significantly" since the government raised the import duty to 8% last Wednesday, according to Bhaskar Bhat, managing director at the country's biggest jeweler Titan Industries, whose shares are down nearly 25% since the hike was announced.

"Gold imports have sharply come down," finance minister P Chidambaram told reporters Thursday.

"Net gold imports averaged $135 million a day in first 13 business day in May till May 20. However, in the subsequent 14 business days, it averaged only $36 million...I would be happy if they come down even further."

When asked if the government is planning any further duty hikes however Chidambaram replied that he does not want to become too unpopular.

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Gold prices hovered just below $1380 an ounce Wednesday morning in London, with silver trading around $21.80, after the metals failed to break through $1380 and $22 respectively.

European stock markets ticked higher by lunchtime – with the exception of Germany's DAX – regaining some of yesterday's losses, which were followed by sell offs in the US and Asia.

Commodities ticked higher this morning while US Treasury bond prices fell ahead of an auction of 10-year debt later today.

"The gold price is unable to recover despite a weaker US Dollar and falling equity markets," says this morning commodities note from Commerzbank.

"The dominant subject on the gold market continues to be the possibility of a premature withdrawal of bond purchases by the US Federal Reserve...in our view, the figures available so far do not constitute any reason to scale back QE3 in the near future."

"There's a tug of war between investors putting money into gold and taking it out," adds Bernard Sin, head of currency and metal trading at Swiss refiner MKS, who also cited concerns among investors "worried about is if there's no more quantitative easing".

"With the Chinese out [on holiday] until Thursday," adds a note from ANZ, "the [gold] market is lacking a key stabilizing factor."

Since falling sharply in April, gold has swung either side of $1400 an ounce, with the gold price falling as low as $1337 and as high as $1478. Silver has also oscillated, while stock markets have retreated after hitting multi-year, or in some cases record, highs last month, with Japan's Nikkei especially hard hit.

"We think the recent volatility can be mostly traced to [Fed] Chairman Bernanke's rather unconvincing testimony in front of Congress a few weeks ago when he failed to clarify exactly when the Federal Reserve's bond buying program will be pared back," says a note from INTL FCStone metals analyst Ed Meir.

"Markets have been on edge ever since, with the global bond market in particular getting hammered."

An auction of 10-year US Treasury bonds later today is set to see benchmark yields above the inflation rate for the first time in 18 months, the Financial Times reports.

The market yield on 10-year Treasuries has risen from 1.6% at the start of last month to nearly 2.3% yesterday. Treasury Inflation Protected Securities (Tips), the price of which is linked to inflation, have also seen yields rise sharply in recent weeks. Bond yields move inversely to bond prices, with rising yields indicating investor selling.

"We have known for some time that Tips were overvalued, and the reversal has happened very quickly," James Evans, senior vice president at Brown Brothers Harriman, tells the FT.

"Rightly or wrongly, the bond market has pulled forward the end of QE and rate hikes coming as early as 2014. It does seem premature."

"The bond market seems to be missing the point that the Fed's policy of tapering [i.e. slowing the pace of QE asset purchases] depends on the tone of economic data," adds Barclays interest rate strategist Michael Pond.

"The market has moved from pricing in less bond buying [by the Fed] to a full-on tightening cycle and we believe that is a different story than what the Fed is trying to communicate."

"Recent weeks suggest that transparency [from the Fed] doesn't mean clarity," says Jim O'Neill, former chairman at Goldman Sachs Asset Management, in a column for Bloomberg View.

"The Fed can talk about 'tapering' QE all it likes; it can't change the basic laws of economics and valuation. A rise in the benchmark yield to 4% would represent normality even if inflation expectations stayed well controlled."

"While it might be easier to detail the 'deserved' casualties of the last month, or more, finding the undeserved casualties might not be quite so obvious," says this morning's note from the currencies team at Standard Bank.

"In our view these are assets where the selling has been more a function of position unwinding than any significant change in the fundamentals that underlie the market."

India's government does not see the need for any further measures to restrict gold imports, according to the country's economic affairs secretary Arvind Mayaram.

India, the world's biggest gold buying nation, raised import duties on gold to 8% last week, and has imposed restrictions on importing on consignment.

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Spot Gold fell to three week lows below $1370 an ounce Tuesday, as stocks and commodities also fell amid ongoing speculation over when the US Federal Reserve might begin reducing the size of its quantitative easing program.

"Gold remains bearish while trading below the $1424 current June high," reckons Commerzbank senior technical analyst Axel Rudolph.

Gold exchange traded funds tracked by Bloomberg saw their gold bullion holdings fall by 6.1 tonnes yesterday, although the world's largest gold E.T.F. SPDR Gold Trust (ticker GLD) added metal for only the sixth day this year, raising its holdings by 2.7 tonnes to 1009.8 tonnes.

Silver meantime dropped back below $21.60 an ounce, falling towards three-week lo0ws touched yesterday.

Major European stock markets were down nearly 1.5% by Tuesday, after losses in Asia that followed the Bank of Japan's decision to leave its QE program unchanged.

"Upbeat sentiment over the US economic outlook continues to feed concerns of increasing US yields and an easing pace to [quantitative easing]," says VTB Capital analyst Andrey Kryuchenkov.

"Volumes in Asia will be subdued due to holidays in China," he adds, referring to tomorrow's Dragon Boat Festival.

Ratings agency Standard & Poor's raised its outlook for its AA+ US credit rating from 'negative' to 'stable' Monday.

"We do not see material risks to our favorable view of the flexibility and efficacy of US monetary policy," said a statement from S&P.

A stable outlook implies the chance of a downgrade in the rating is less than one-in-three.

"The last time the rating agency moved to downgrade US credit in August of 2011, the markets were sent into a tizzy with equities plunging and gold soaring to a record high of $1920 an ounce a month later," says a note from Ed Meir, metals analyst at brokerage INTL FCStone.

"However, this time around, the move by S&P did not cause much of a stir, as investors seemed to be more focused on erratic growth patterns evident across most industrialized economies, coupled with growing uncertainties with respect to what the Federal Reserve is going to do with regard to its stimulus program."

So-called 'Fed tapering' – the potential reduction in the size of the Fed's asset purchase from the current $85 billion a month – "is a big issue" former World Bank president Robert Zoellick said Tuesday.

"The question," said Zoellick, "will be, as the Fed eventually moves away from the monetary easing policies, what will be the effect of [withdrawing]the wall of money that's moved around the world?"

"[US] Labor market conditions have improved since last summer, suggesting the [Federal Open Market] Committee could slow the pace of purchases," James Bullard, president of Federal Reserve Bank of St Louis, which is not an FOMC member this year, said Monday.

"But surprisingly low inflation readings may mean the Committee can maintain its aggressive program over a longer time frame."

The Bank of Japan meantime left its main policy interest rate on hold at 0.1% Tuesday, while reiterating its quantitative easing commitment to grow the monetary base by an annual up to 70 trillion Yen ($720 billion).

UK industrial production meantime fell by 0.6% in the year to April, according to official figures published this morning, while manufacturing production, a subset of industrial production, down 0.5% over the same period.

Over in Europe, Germany's Constitutional Court today began hearing testimony on the European Central Bank's Outright Monetary Transactions program, by which the ECB has pledged to buy the debt of distressed sovereigns on the secondary market to mitigate borrowing costs.

Bundesbank chief Jens Weidmann, who has publicly criticized OMT, is expected to testify at the hearing, which has been added to an existing case before the Court over whether the European Stability Mechanism rescue fund breaches Germany's constitution.

Weidmann's fellow German Joerg Asmussen, who sits on the ECB's Executive Board, is also expected to appear, as is finance minister Wolfgang Schaeuble

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Wholesale gold bullion prices fell to three week lows around $1410 an ounce Wednesday, as European stock markets ticked higher, reversing earlier losses following disappointing Eurozone growth data.

Gold in Euros fell as low as €1094 an ounce, while gold in Sterling fell below £930 an ounce.

"Gold spot is approaching the support [level] of $1403 [an ounce]," say technical analysts at Societe Generale.

"There is no significant level of support between here and the low from April 16 in the $1322 area," adds the latest technical analysis from Scotia Mocatta.

The world's biggest gold exchange traded fund SPDR Gold Trust (ticker: GLD) could lose up to a further four million ounces (almost 125 tonnes) to add to the nearly 300 tonnes it has lost through redemptions since the start of the year, according to analysts at Deutsche Bank.

"We expect that the bulk of the drawdown comes from institutional investors rather than retail investors," says a report from Deutsche.

"If in fact only institutional selling is occurring in the gold E.T.F. then we expect that nearly two-thirds of the selling that is likely has probably already passed. As SPDR is roughly half of total physically backed E.T.F.s, this could imply a further 4 to 8 million ounces [approx. 125 to 250 tonnes] selling [from all gold E.T.F.s] if macro fundamentals continue to move against gold."

"In the short term, gold prices remain caught between the recent slowdown in US activity and the significant decline in ETF holdings," adds a note from Goldman Sachs, whose analysts have a 12-month gold forecast of $1390 an ounce.

"While the sell-off in gold prices has been faster than we expected, with prices below our near-term forecasts, further unwind of ETF positions would likely continue to precipitate this decline...going forward, we expect that gold prices will continue to decline should our economists' forecast for a reacceleration in US growth later this year prove correct."

"Gold is likely to remain sensitive to potential dialog regarding the Fed's QE intentions," adds a note from HSBC, referring to the US Federal Reserve's ongoing $85 billion a month quantitative easing policy.

"Further comments by Fed members for scaling back QE would be negative for bullion prices."

Silver meantime fell to around $23 an ounce this morning, like gold hitting a three-week low, as other commodities also dipped and US Treasury bonds gained.

On the currency markets, the Euro fell to a six-week low against the Dollar Wednesday, while the Yen touched a fresh four-and-a-half year low, as Japan's Nikkei 225 index breached 15,000 for the first time in over five years.

Over in Europe, France fell back into recession in the first quarter, according to provisional GDP data published Wednesday that show a second successive quarter of negative growth. German Q1 growth meantime was 0.1%, provisional figures show, less than the consensus forecast among analysts. GDP for the Eurozone as a whole contracted 0.2% in Q1, data published this morning show, to make a 1% year-on-year drop in economic output.

Ratings agency Fitch meantime upgraded its credit rating for Greece Tuesday, citing progress on cutting the government budget deficit, although Fitch still rates Greek government bonds as junk with a rating of B-.

The latest Bank of England Quarterly Inflation report, published this morning, shows a "welcome change in the economic outlook", according to outgoing governor Mervyn King.

"Today's projections are for growth to be a little stronger and inflation a little weaker than we expected three months ago," King told reporters this morning.

"That is the first time I have been able to say that since before the financial crisis." King added however that "the challenges facing central bankers are as great as they have ever been".

Ben Traynor

BullionVault

(c) BullionVault 2013

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

Spot Gold fell towards three-week lows Tuesday, dropping as low as $1423 per ounce, as the Euro also fell against the Dollar after comments from those attending today's Eurozone finance ministers' meeting appeared to show disagreement over the creation of a banking union.

Days after Germany's DAX index set a new record high, European stock markets extended yesterday's losses this morning.

"Due to US Dollar strength and record levels in European shares, gold has been losing its 'safe haven' appeal in recent days," says a note from German-based refinery group Heraeus.

Gold in Euros meantime dipped briefly below €1100 an ounce, while gold in Sterling fell below £935 an ounce.

Silver meantime fell to the lower end of its range for the past three weeks, dropping below $23.50 an ounce, as other commodities also dipped lower.

US Treasuries gained while German Bund prices fell.

The Eurogroup of single currency finance ministers were expected to discuss the creation of a banking union – which would include deposit guarantees and supranational supervision of financial institutions – as part of their meeting today in Brussels. 

"We want a single European resolution regime," European Central Bank executive board member Joerg Asmussen said, "together with a single resolution agency and a single resolution fund that is financed by a levy from the banking industry. This should come into place in parallel with the single supervisory mechanism hopefully by the summer of next year."

Shortly after Asmussen's comments were reported the Euro gave up today's gains against the Dollar, dropping back below $1.30. 

In contrast with Asmussen's comments, German finance minister Wolfgang Schaeuble told reporters a day earlier that existing European treaties "don't give enough foundation for a European [banking] restructuring authority".

"You can do the same thing very well with a network of national authorities," Schaeuble added.

"We should go as far as possible within the current treaties," countered French finance minister Pierre Moscovici, "and then think about what could require a change in treaty. Our belief is that we can go very far."

"The Germans are putting forward understandable questions which will have to be dealt with," added Eurogroup president and Dutch finance minister Jeroen Dijsselbloem.

"But I don't see why that would stop us making progress on the banking union."

Ireland meantime may seek to use the ECB's Outright Monetary Transactions program – whereby the ECB pledges to buy government bonds on the secondary market to prevent a sharp rise in borrowing costs – as it exits its bailout, the country's finance minister said Monday.

"We haven't decided in government yet whether we will apply or not," said Michael Noonan, "but it is something that seems to be a mechanism that is working very well."

The supply of scrap gold sent to refineries is expected to drop 4% this year compared to 2012, according TD Securities. The Toronto-based brokerage says around 1550 tonnes of scrap gold will be recycled during 2013, the lowest total since 2008, Bloomberg reports.

Last month saw gold's biggest two-day drop in three decades.

"A lot of people were shocked," says Arthur Abramov, owner of cash-for-gold business Manhattan Buyers Inc., which saw its monthly volume of gold recycled fall by 40% to 300 ounces.

Over in India, yesterday's Akshaya Tritiya festival, viewed as an auspicious day to buy gold, saw an increase in gold jewelry sales compared to last year, according to local press reports.

"Sentiment of gold buying has turned positive," says Haresh Soni, chairman of the All India Gems & Jewellery Trade Federation, adding that he expects gold sales for yesterday to show a 20-25% increase on last year's festival.

Ben Traynor

BullionVault

(c) BullionVault 2013

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.

Spot market gold bullion prices fell to $1430 an ounce Monday, 1.2% down on where they ended last week, as stock markets also fell and the US Dollar held onto most of its gains from last week.

Silver fell to $23.70 an ounce – 0.8% down on last week's close – as other commodities also fell, with the exception of copper.

India's central bank meantime confirmed proposed restrictions on gold imports that one refiner said could lead to gold imports falling by half this year.

Since breaking through ¥100 last week, the Dollar has held most of its gains against the Japanese currency, while the US Dollar Index, which measures the Dollar's strength against a basket of other currencies, is trading close to one-year highs.

"Yen selling will have been encouraged by the outcome from [last week's] G7 meeting," says Bank of Tokyo-Mitsubishi currency analyst Lee Hardman, "where officials reiterated that they will tolerate Yen weakness as long as it results from the use of domestic instruments to stimulate the Japanese economy."

The US Federal Reserve meantime has "mapped out a strategy" for winding down its $85 billion a month asset purchase program, known as quantitative easing, according to an article by the Wall Street Journal's Jon Hilsenrath over the weekend, although "the timing on when to start is still being debated" it adds.

Hilsenrath – whom some fellow journalists have dubbed 'Fedwire' on account of a supposed closeness to the Fed – also filed a piece profiling current Fed vice chair Janet Yellen, describing her as a "top contender" to succeed Ben Bernanke as chair.

In a speech earlier this year Yellen said the US faces "a long road back to a healthy job market" and that Fed policymakers are "actively engaged in continuing efforts to promote a stronger economy, more jobs, and better conditions for all workers".

The so-called speculative net long position of Comex gold futures and options traders – calculated as the difference between 'bullish' long and 'bearish' short contracts held by noncommercial traders – fell to its lowest reported level since November 2008 last Tuesday, equivalent to 245.3 tonnes, according to weekly data published Friday by the Commodity Futures Trading Commission.

"Underlying moves, while not particularly violent, were bearish," says a note from Standard Bank.

"Speculative shorts saw 11.8 tonnes added, while 10.7 tonnes in long positions were unwound."

The Dollar value of India's trade deficit rose to $17.8 billion last month, up from $10.3 billion in March and $14.0 billion in April 2012, according to government data published Monday. Imports of gold bullion into India, traditionally the world's biggest gold buying nation, jumped 138% in April as the gold price fell sharply.

Bullion imports have stayed strong this month, according to reports, ahead of today's Akshaya Tritiya festival as well as proposed import restrictions from the central bank, which were confirmed today.

The Reserve Bank of India confirmed Monday it will implement its proposed restrictions on banks importing gold on a consignment basis, whereby bullion is shipped but ownership remains with the supplier.

"To moderate the demand for gold for domestic use, it has been decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of exporters of gold jewelry," said a statement from the central bank.

"The country's overall gold imports will be hurt [by these restrictions]," says Ashwini Kapoor, general manager of the precious metals division at state-run refiner MMTC.

"Volumes will fall by 50% in the current fiscal year."

Over in Europe, German finance minister Wolfgang Schaeuble said Monday that Slovenia "can manage" without a bailout.

Ben Traynor

BullionVault

(c) BullionVault 2013

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