by Adrian Ash BullionVault Thursday, 23 January 2014 Anti-gold rules getting hot for Congress, and prices, as BJP’s Modi declares victory… BIG though China is for gold these days, India has remained the elephant shut out of the room. Hence Thursday morning’s pop in London prices. Quickly up $10 per ounce, and then another […]
London Gold Market Report
from Adrian Ash
Thurs 19 Dec 08:25 EST
Fed Tapering Whacks Gold, Spooks China, “Normalization” Challenged by US Earnings
WHOLESALE London gold sank against all currencies Thursday morning, falling 1.9% vs. the Dollar to hit 6-month lows after initially trading flat overnight despite the US Fed finally reducing its $85 billion per month in asset purchases.
Cutting next month’s quantitative easing of US mortgage and longer-term government bond rates to $75bn, the Fed pointed to “growing underlying strength in the broader economy.”
US stockmarket indices the S&P500 and the Dow surged to new all-time closing highs, while Treasury bonds fell and spot gold fell through this week’s previous low at $1230.
Besides the taper, however, the Fed revised its policy on short-term interest rates, saying it will hold the federal funds rate at zero “well past the time” that the US jobless rate falls to 6.5%, its previous line in the sand.
Overnight in Asia, Japanese shares rose but Chinese stocks fell as the People’s Bank of China broke its own rules and took to Weibo, the equivalent of Twitter, to announce a “short-term liquidity operation” after Shanghai’s interbank lending rate jump above 10%.
The PBoC usually waits a month before reporting such moves, says the Financial Times.
“It’s very clear they want to calm down market fears,” the FT quotes ANZ analyst Zhou Hao, noting the previous spike in Chinese interest rates in June, when US Fed chairman Ben Bernanke spoke about possible QE tapering.
Shanghai gold today fell 0.8% in Yuan but increased its premium over international prices from $6 to $11 per ounce.
Amongst Western investors, “More sensible minds realise,” says a note from David Govett at brokers Marex, “that on the whole [the Fed news] is not a good move for the precious complex.
“With further tapering probably to come over the course of next year, the outlook remains muted. However, I don’t subscribe to the theory that it’s all over for the bullion market [and] would be a buyer of dips if we do manage to break below $1200.”
Bids in London’s wholesale market briefly dropped below that level Thursday morning, hitting a 6-month low of $1199.75 per ounce.
Priced in Sterling and Euros, wholesale gold bullion fell to its lowest since spring 2010, down 29% and 31% respectively from the start of 2013.
Silver tracked gold in Dollars, briefly falling below $19.30 per ounce – a “key level” according to technical analysts at one bullion bank.
Fed tapering “highlights the overall positive sentiment towards the macro economy,” reckons UBS analyst Joni Teves.
“Equities are in fierce competition with gold for investor dollars, and this year’s trend of rotation away from gold into growth assets is expected to continue into 2014.”
“This is another sign of increasing normalisation for the world economy,” agrees Matthew Turner at Macquarie Bank. “Gold’s insurance function is less desirable in that environment.”
“But if the economy is accelerating as people think,” counters Albert Edwards in his latest Global Strategy Weekly for clients of French investment and London bullion bank Societe Generale, “how come Thomson Reuters has just reported the fastest pace of US earnings downgrades on record?
“If we are set for a profits-driven economic slowdown, then the low rate of core inflation will start to become a key concern. Deflationary forces are in fact stronger than even the latest [official data] suggests.”
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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.
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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 price of gold held flat Wednesday morning, ticking above $1230 per ounce in very quiet trade ahead of today’s much-awaited decision on monetary policy from the US Federal Reserve.
LONDON gold in Dollars terms traded flat for the week Friday morning, holding around $1230 per ounceafter what one analyst calls “a tumultuous few days.”
ASIAN and London dealing was quiet in gold Wednesday morning, with prices holding $10 per below yesterday’s sudden rise to 3-week highs above $1267.
The PRICE of gold rose to touch $1250 per ounce for the first time in 7 sessions Tuesday morning, as major government bonds also rose after comments from US Fed officials on the odds of reducing their monetary stimulus at next week’s policy meeting.
The PRICE of wholesale gold held steady around $1230 per ounce in London trade Monday morning, ticking upwards as European shares slipped but Asian stock markets closed higher after strong data from China.
The PRICE of gold fell hard Thursday lunchtime in London, giving back all of yesterday’s sudden 3.1% jump to trade back at $1223 per ounce after stronger-than-expected US economic and jobs data.
JUMPING to $1229 per ounce in London trade Wednesday, gold defied analyst expectations
and reversed earlier 1% losses after stronger-than-expected US jobs data.
WHOLESALE London prices for gold pushed higher in quiet trade Friday morning, on
course for the largest November drop since 1978 in US Dollar terms.