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

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 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

The Gold price rallied from a 1-week low at $1376 per ounce Monday morning in London, edging back up to $1383 as world stock markets rose.

Silver fell within 20¢ of mid-May's 30-month low, before rallying to $21.80 per ounce.

Commodity prices fell after weaker-than-expected Chinese industrial data. US Treasury bonds also slipped in price once again, nudging interest rates on 10-year debt up to 2.17%.

The gold price "conclusively broke back down through $1400 and stayed there" following Friday's release of US Non-Farm Payrolls data for May, says the latest daily note from brokers Marex Spectron.

But "the market is well ahead of itself in thinking the Fed will soon pare back on their stimulus," reckons Danske Bank's head of fixed-income trading Soeren Moerch, pointing to the slight uptick in the US jobless rate shown in Friday's official data.

Now at 7.6%, the unemployment rate is well above the 6.5% level previously named by US Federal Reserve chairman Ben Bernanke as key to any review of target interest rates.

"The latest employment news," says one gold price analyst, "supports our view that the [US Federal Reserve's] asset purchase programme will not start to 'taper' until the latter part of this year."

But Fed officials "are likely to signal at their June policy meeting that they're on track to begin pulling back their $85-billion-a-month bond-buying program," writes the Wall Street Journal's Jon Hilsenrath – dubbed "Fed wire" for his apparent connections to the US central bank.

"The recent recovery [in the gold price] is over," Bloomberg today quotes Richard Adcock, technical strategist at London bullion market-maker UBS.

"The next leg of the bear trend is to be seen down to the long-term 50% retracement point at $1303, which we would set as our objective."

Other analysts point to a trading range with either $1360 or $1375 at the bottom, with a move above $1420 needed "in order to escape the downward trend" according to German refining group Heraeus in a note.

Even before Friday's jobs data, "News out of India had already weighed on gold," says Heraeus.

Last week's import duty rise from 6% to 8% for gold going into India – the world's No.1 gold-buying nation – in will cut foreign-currency outflows and so help reduce the country's current account deficit, spokesmen for the Finance Ministry said at the weekend.

"The prospect of lower inflation and [lower] gold imports [is] good news for the Rupee," agrees Singapore fund manager Samir Arora of Helios Capital.

The Indian Rupee today fell to new all-time lows at worse than 58 per Dollar.

"I think this is panic in the market which is unwarranted," economic affairs secretary Arvind Mayaram told journalists Monday, pointing to concerns that tighter US policy would hurt investment flows to India.

"[The Fed] have now more than clarified that this [tapering of QE] is not imminent. Neither is it something which will happen quickly."

"What's happening today is not India-specific," says J.P.Morgan's chief India economist, Sajjid Chinoy, quoted by the Financial Times.

"Emerging markets are bleeding [money] across the board."

Speculative traders in US futures and options meantime grew their overall bullishness on gold in the week-ending last Tuesday, latest data from regulator the CFTC show – the first such rise in two months.

The so-called "net long" of bullish minus bearish bets held by non-industry players rose by 13% to the equivalent of 204 tonnes – only the 7th week-on-week rise out of 23 weeks so far in 2013.

Compared to New Year, however, the total net long remained below one-third the size. It was less than one-fifth the record levels of summer 2011.

"Silver [positioning] followed the recovery in gold," says the weekly analysis from Standard Bank in London.

"Unlike for gold, it was an addition to speculative longs that drove the overall improvement...avoiding a push into negative territory which had seemed imminent."

(c) BullionVault 2012

Gold and silver prices whipped sharply Friday lunchtime in London, as new US jobs data matched analyst forecasts with a 175,000 rise in Non-Farm Payrolls for May and a slight rise in the jobless rate to 7.6%.

Having touched 1-week highs above $1419 per ounce on Thursday, gold fell back through $1400 Friday as European stock markets erased earlier losses.

Silver lost and then regained 30¢ per ounce before falling again through $22.40, also near this week's lowest level.

"The market [had] the feeling that it wants to go higher," said one broker earlier Friday.

"While the technical downtrend is still in place," says bullion market-maker Scotia Mocatta in a technical note, "the trend is weakening as gold slowly grinds higher."

With gold still headed for a slight weekly gain, the 33 analysts, traders and retailers surveyed each week by Bloomberg's commodities team are "more bullish" than any time since March 22 – three weeks before the worst crash in gold prices in 30 years – the newswire reports.

Nineteen respondents expect gold prices to rise next week, against 8 bears and 6 neutral.

In the market, however, the number of hedge funds worldwide investing in gold fell from 310 to 290 between December and May, reckons EurekaHedge Pte Ltd., a Singapore-based consultancy, quoted by Bloomberg.

Latest data from US regulator the CFTC said speculative traders held the greatest number of bearish contracts on gold futures on record last week. Accounting for bullish bets, that move cut their net position as a group to a 5-year low equal to 171 tonnes.

Data for the week-ending Tuesday 4 June will be released after US markets close today.

Ahead of Friday's jobs report, a new research paper from the Chicago Fed said Thursday that the US economy needs to add 80,000 new jobs per month to keep the unemployment rate steady.

"It's time that we begin to gradually unwind [QE and zero rates]," said Philadelphia Federal Reserve president Charles Plosser – a voting member of the Fed's policy committee at alternate meetings in this year – on Thursday.

But markets have "over-reacted" to talk of tapering the Fed's $85 billion in monthly QE, he said.

"The markets seem to take this very seriously at some level, which I think is probably a mistake."

The Federal Reserve has said it will only consider raising interest rates when the jobless rate falls below 6.5%.

After the European Central Bank left its policy unchanged yesterday, France's trade deficit and government deficit both showed a rise for May in new data Friday morning.

German industrial output surprised analysts by growing 1.8% month on month, but the Bundesbank today cut its forecasts for economic growth from 0.4% to 0.3% for 2013, and from 1.9% to 1.5% for 2014.

"Weak credit trends in the Eurozone," says Standard Bank's currency strategist Steve Barrow, "reflect themselves in continued recession and low inflation.

"[So] we expect the ECB to cut rates further, possibly as soon as next month."

"The European banks had no choice but to shrink their balance sheets and sell assets," Reuters quotes a "senior source" commenting on the dramatic fall in lending to commodity traders since 2011.

With Europe's share of global commodity lending now down on one estimate from 75% before the Eurozone crisis to 50%, "I can't see them becoming dominant again," the newswire quotes Jean-Francois Lambert, head of commodity trade finance at HSBC.

Meantime in India – the world's heaviest gold-buying nation – the government's new campaign against household gold demand was challenged today by the jewelry industry, as well as market analysts.

"We are with the government on the need to reduce the current account deficit," the Wall Street Journal quotes but not at the cost of damaging the industry," chairman of the All India Gems & Jewellery Trade Federation, Haresh Soni.

"The recent round of initiatives to put a check on imports," says Pankaj Parekh, vice chairman of the Gem & Jewellery Export Promotion Council, "will make lives of small and medium jewellers difficult in the coming days."

Some 3.5 million people work in India's gold and jewelry sector, says theEconomic Times, with 80% of them living in Bengal province.

But "The [government] knows they can't control jewellery demand," says Motilal Oswal analyst Kishore Narne to the Financial Times.

"They probably just think they might as well make some money off it."

(c) BullionVault 2012

The Wholesale price of gold flipped yet again either side of $1400 on Thursday in what dealers called "choppy" trade ahead of tomorrow's much-anticipated US jobs data for May.

Asian stock markets followed Wall Street's overnight loss to finish lower, but European equities rallied as major government bonds held flat.

Commodities slipped even as the Dollar fell to new 4-week lows after the Bank of England and the European Central Bank both left monetary policy unchanged at their June meetings.

Silver ticked higher to $22.65 per ounce.

"On any downside below $1400 per ounce," said Standard Bank analysts in a note, "we still feel that physical demand should once again return and thereby limit moves lower.

"Since April this support from the physical market has prevented gold from pushing significantly below $1360 per ounce."

Officials in India – the world's No.1 – today urged banks to deter consumer demand for gold after raising import duty to 8% on Wednesday.

In China – the world's second-largest gold buying nation – "The ongoing Shanghai arbitrage is the main attraction for demand," says a trader in Sydney, quoted by Reuters.

Prices of Shanghai gold futures held some $20 about international benchmarks on Thursday. China's markets will be closed for the first three days of next week for the Dragon Boat Festival.

In the United States – world No.3 for gold jewelry and investment purchases – demand for American Eagle gold coins remains "unprecedented" according to US Mint acting director Richard Peterson.

"We are buying all the coin blanks [which suppliers] can make."

Anti-government protests meanwhile continued in Turkey, the fourth-largest market for gold in 2012.

"While [India's] duty hike may make bullion more expensive," writes HSBC analyst James Steel, "it is important to note that gold prices in local currency terms are currently lower than at any time in the last year"

Prices to buy gold in Indian Rupees "are still at attractive levels," says Steel.

A day after imposing new blocks on legal gold imports, the Indian government yesterday hiked bullion import duty from 6% to 8% by value – an 8-fold increase from the start of 2012, when New Delhi began blaming gold jewelry and investment purchases for India's large balance of trade deficit.

"This shows that the Indian government is very serious about reducing gold imports," says one bullion dealer.

While the immediate impact will be higher prices for Indian households, "The nature of demand at the retail level is such that restricting supply will not be effective in the long run," says India's managing director at market-development organization the World Gold Council, P.R.Somasundaram.

"[It's] likely to lead to...demand being met increasingly through unauthorised channels, which will not be positive for either the economy or for society."

Also known as the "parallel market", smuggling may account for 20% or more of India's total imports in 2013, according to one estimate quoted by the Economic Times.

Called "wasteful expenditure" by one senior official this morning, household gold demand should be further deterred by advising customers against buying gold coins, finance minister P.Chidambaram told the same banking conference in Mumbai.

The new import duty should be positive for the Indian Rupee, albeit short term, agree analysts at Societe Generale, Bank of America-Merrill Lynch and Kotak Mahindra Bank.

Thursday morning however the Rupee fell, down to 57 per US Dollar for the first time in 12 months and very near its all-time record low.

(c) BullionVault 2012

Gold bullion traded for London delivery rose back through $1400 for the fifth day running on Wednesday morning, rising as the US Dollar slipped following weaker-than-expected jobs data.

Gold priced in the Euro ticked higher to €1075 per ounce, but was unchanged for the week so far in terms of Pounds Sterling below £914.

Silver prices rose back above $22.60 per ounce.

"The [gold] market has quite rightly shrugged this off," says David Govett at brokers Marex Spectron of yesterday's decision by the Indian government to ban credit-paid imports of gold bullion.

"If India wants gold, it will buy gold!"

"As a result of these measures," agrees the Business Standard in an editorial, "gold demand and import will come down...[but] smuggling of the precious metalis likely to go up."

Reuters says retail distributors in the world's largest gold-consuming nation are "braced for higher premiums" over and above the international benchmark price for gold, typically quoted for London settlement.

"Supplies will get more scarce," the newswire quotes Mayank Khemka of the Khemka Group. "There won't be any [gold bullion] imports for the next two-three days until clarity comes."

Speaking for the world's leading gold-mining companies, "We recognize the short-term needs for such measures," The Times of India quotes Aram Shishmanian, CEO of market development organization the World Gold Council.

"But we are proposing to work with [the Reserve Bank of India]," he explains, "so that in the long term gold could be monetized as a financial asset" rather than as a physical consumer commodity dragging on India's trade balance.

April saw net imports of gold bullion to China – the world's #2 consumer nation – fall 41% from March's record high, new data showed today.

The net reading of 80 tonnes "is a surprise" said one dealer, but others cited a backlog of paperwork for gold importing banks who had already used their official quota in the first 3 months of the year.

The Shanghai Futures Exchange yesterday cut the amount of money gold and silver traders must keep on deposit against their positions from 7% to 4% by value.

For Western money managers, meantime, "Gold is a beneficiary of negative real interest rates," says a research note from asset managers Blackrock, noting that May saw the sixth month running of outflows from exchange-traded gold trusts, knocking nearly one-third of gold ETF assets from the start of this year to $96 billion worldwide.

Even so, "Many invest in gold as a long-term holding due to its diversifying properties," Blackrock adds. Because gold bullion "has historically shown little to no correlation with other major asset classes, including commodities."

Commodity prices meantime ticked higher Wednesday morning, as did major government bonds, while the US Dollar slipped following news of weaker-than-expected growth in US hiring.

The private-sector ADP report – released ahead of Friday's closely-watched official Non-Farm Payrolls report – missed forecasts of 165,000 net new jobs by a fifth.

Ten-year US Treasury yields fell to 2.12%, a 1-week low.

Two US Federal Reserve presidents said separately on Tuesday that reducing the central bank's huge monetary stimulus is beginning to look "appropriate".

"Gold continues to move sideways within a small range," says the latest technical analysis from bullion bank Scotia Mocatta, pegging support at $1373 and resistance at $1422.

"Consolidation is ongoing," agrees Axel Rudolph at Commerzbank, "but the overall trend remains bearish" with support pegged lower at $1338.

On the supply side, the world's largest gold mine, the giant Grasberg mine in Indonesia, will be shut for 3 months as the government investigates a collapse which killed 28 miners in May.

Majority owned by Freeport-McMoRan Copper & Gold Inc, Grasberg had been scheduled to produce some 65 tonnes of gold this year – more than 2.4% of global output – after falling to 28 tonnes due to strikes in 2012.

The shutdown will likely bloock 125,000 tonnes of copper production too.

Meanwhile in Brussels on Wednesday, Latvia was welcomed by the European Commission as the 18th member of the Euro currency union, joining on New Year's Day 2014.

Anti-Euro parties won more than 50% of the vote in last weekend's elections in Latvian capital Riga, the BBC says.

Approving Latvia's accession to the 330-million citizen Eurozone, the European Central Bank today warned of the "important risk to financial stability" posed by the reliance of "a significant part" of the country's banking sector on foreign investors' deposits.

(c) BullionVault 2012

The wholesale gold price slipped back below $1400 per ounce Tuesday morning in London as world stock markets rose and the Indian government tightened restrictions on gold importers once again.

After Monday's weak US manufacturing data gave gold what Commerzbank calls "sufficient fuel" to touch the $1415 level – identified by some technical analysts as key resistance – the gold price dropped $8 in 15 minutes mid-morning.

With immediate effect, "Any import of gold on consignment basis [where the buyer has yet to pay for the gold] shall now be permissible only to meet the needs of exporters of gold jewellery," the Reserve Bank of India said in a statement.

The world's #1 consumer market for physical gold, India recorded a trade deficit worth $17.8 billion in March – equal to 11% of economic output.

Some 40% of March's deficit was due to gold bullion imports.

"There's no doubt that India is a strong demand market for gold," says Manne Rasmussen, an analyst at the $650 million Vontobel Belvista Commodity Fund in Zurich, quoted by the Wall Street Journal yesterday.

Rasmussen says India's surging gold demand was a reason Vontobel recently closed a bet on the gold price falling.

India's government yesterday corrected the 262 tonnes of gold imports reported for May by Finance Minister P. Chidambaram to 162 tonnes.

That was still more than all Indian gold imports during April to June 2012, however.

"Physical buying in India [was already] virtually non-existent" Tuesday morning, said brokers Marex Spectron in a market note, "and Chinese demand is much smaller above $1400."

"A recovery in the stock market is [also] currently a negative factor for gold," Peter Fertig at Quantitative Commodity Research Ltd told Bloomberg today.

With developed world stock markets gaining 14.5% so far in 2013, according to Reuters data, the gold price has dropped 15.7% and silver bullion is down more than 25%.

Western households cut their demand for physical gold in May from April's 16-month high, but remained positive according to Bullion Vault's latest Gold Investor Index.

"There is a case to be made for a short-covering rally in the near term," says TD Securities in Toronto, pointing to the record-large bearish betting by speculative traders in US gold futures and suggesting a possible move "into $1500 per ounce territory."

Thursday's interest-rate decisions in London and Frankfurt, plus Friday's US jobs data, "[are] likely to keep price action choppy," says Credit Suisse.

"Add in a dash of short-covering and it would not be too surprising to see gold reach the next technical resistance level of $1422/24 in the next few days, perhaps even $1445/50.

"However, we think that any short-term rally will be limited."

Fellow London market maker UBS agrees, saying that "Gold is seemingly becoming less relevant in the current environment...prompting specs to take an aggressive short position in gold."

If Friday's US non-farm payrolls report is weaker than analysts expect, "The dominance of shorts increases the risk of a short-covering rally" in the gold price.

Stock markets rebounded worldwide meantime Tuesday morning, with Japan's Nikkei index regaining half of Monday's near-4% drop.

Turkish equities also rose sharply, as did the Lira and Ankara's government bond prices, despite fresh anti-government protests across the country.

One protester died Monday in the city of Antakya, near NATO member Turkey's border with war-torn Syria.

Despite prime minister Erdogan flying out to a planned meeting in Morocco, police today deployed water cannon around his official residence.

Turkey imported 43.5 tonnes of gold in May, according to the Istanbul Gold Exchange, just shy of April's 5-year record.

(c) BullionVault 2012

London prices to buy gold and silver rose in volatile trade Monday morning, recovering Friday evening's late losses as Asian and European stock markets fell hard.

Far Eastern premiums over and above international prices continued to ease back, according to wholesale dealers.

"Bids [to buy gold] seemed to vanish into thin air," says one, "as soon as the price got close to $1420 on Friday."

With Turkey's stock market losing 6% after a weekend of anti-government protests were broken up by police last night, the MSCI world index of 9,000 equities in 45 countries today reversed the last of May's rise to 5-year highs.

Last month's drop in US Treasury debt prices pulled global bonds to their worst monthly loss in 9 years, down 1.5% overall according to the Bank of America-Merrill Lynch Global Broad Market Index.

US Treasury yields rose Monday as prices fell further, pushing 10-year yields up to a new 1-year high of 2.17%.

"Rising yields – albeit at historically low levels – is not a friendly environment for gold," says Swiss bank and London bullion market maker UBS in a note.

With UBS's interest-rate analysts saying that "the rise in rates is too much, too fast," however, the predicted drop in 10-year yields to 1.7% "would be a gold-positive development," says the precious metals team.

"It may well act as the tailwind gold needs right now to stay northbound."

Speculative betting on rising gold prices is now "at its lowest ebb for almost a decade," say analysts at Deutsche Bank today. So "one could argue that the pace of liquidation is likely to slow.

"The past six months," says Deutsche, "has seen one of the most dramatic reductions in net speculative length in gold on record."

Latest data show what Standard Bank today calls a "massive addition to short [bearish] positions" in US gold futures and options.

Analysis of the same data by BullionVault shows that less than 60% of all directional betting on gold prices by hedge funds and other speculators is for rising prices, the lowest "bull ratio" since at least 2005.

"While gold prices may temporarily move higher in the next few years," reckons economist and Stern School of Business professor Nouriel Roubini, "they will be very volatile and will trend lower over time as the global economy mends itself.

"The gold rush is over," he says, forecasting $1000 gold by 2015.

Roubini called gold "a bubble" in December 2009, saying almost two years and 60% before its all-time high that the bull market would burst thanks to a rising US Dollar.

Last week saw speculative betting on a rising Dollar near record levels, according to analysts at Nomura bank, while ING bank calls it "the largest 'long' USD position on record."

"The bull market is over" for developing-nation currencies, reckons SocGen strategist Kit Juckes, speaking to Bloomberg, calling the South African Rand "the first of what I suspect will be a series of dominoes to fall," after its worst 1-month drop in two years.

Data from the Bank for International Settlements meantime show international banking flows shrinking fast at the end of 2012, with cross-border loans in the 17-nation Eurozone shrinking at a 20% annual pace.

Domestic lending by UK banks also continued to shrink in the first 3 months of this year, down by £300 million despite the coalition government's new funding-for-lending scheme.

"Gold continues to be useful as an insurance policy in people's portfolios to guard against uncertainty and possibly some economic dislocation," says Michael Cuggino, manager of some $14 billion in assets at the Permanent Portfolio Family of Funds in San Francisco.

"You have a lot of monetary creation going on," he tells Bloomberg.

"While inflation is not a current threat, that doesn't mean it's not a threat at some point."

(c) BullionVault 2012