London Gold Market Report
from Adrian Ash
Fri 25 Jan, 07:45 EST
Gold Looking “Sloppy” Short term, But Pullback “Attractive” as Chinese Buyers Take World #1 Spot
The GOLD PRICE slipped back to last night’s near-two week lows at $1665 per ounce Friday lunchtime in London, heading for a 1.1% drop on the week as world stock markets and other “risk assets” rose.
Silver also ticked lower to trade 2.7% beneath Wednesday’s 5-week highs.
Germany’s Ifo index of business sentiment meantime hit its best level since June.
The European Central Bank surprised analysts by saying 278 banks in the single-currency zone will repay €137 billion ($184bn) of their 3-year LTRO loans next week, nearly two-thirds more than expected.
“It now seems that the stronger tone in global equity markets, coupled with a notable easing in European and US market tensions, is leading to short-term pressure on gold,” reckons INTL FCStone analyst Ed Meir.
“We think it will continue for a little while longer, given that negative chart picture[s] are also contributing to the sloppier tone.”
Also looking at gold price charts, this week’s “failure to make a new high…is bearish,” says bullion bank Scotia Mocatta, pointing to $1625 as the “next level of support.”
Barclays’ technical analysts think a “pullback” to $1640 is now likely, following Thursday’s finish in US gold futures beneath $1675.
Despite stronger-than-forecast US economic data, however, “Accommodative [monetary] policy is still expected to remain in place for some time,” counters London market-maker UBS, “a scenario that continues to be conducive for higher gold prices.
“[Gold's] recent pullback should be viewed as an opportunity to pick up metal at more attractive levels.”
On the currency markets Friday, the British Pound fell to a 5-month low against the Dollar and a 13-month low against the Euro after new data showed the UK economy shrinking 0.3% at the end of 2012.
That capped the drop in Sterling gold prices to £5 for the week at £1056 per ounce.
The quantity of gold bullion held to back shares in the world’s biggest gold ETF trust fund – State Street’s GLD – shrank again on Thursday, down another 3 tonnes to 1331.7 and now 1.7% smaller from mid-December’s record holding.
Silver backing the iShares Silver ETF – the SLV – extending this week’s contraction to 237 tonnes or some 2.2% of the total.
That is “still well under half” of last week’s addition however, notes Bloomberg News.
“We used to watch Comex [futures contracts] open interest,” Bloomberg quotes Bernard Sin at Swiss refining group MKS in Geneva, “but now everybody looks at ETF holdings to give a clear signal of investor interest.”
Over in Asia, meantime, China is “now clearly the largest global consumer of gold” – overtaking India at last – says the latest Commodities Weekly from Natixis.
Analysts at the French investment bank and bullion dealer point to the latest available import and mining-output data available from the world’s top two gold buying nations.
“India’s low figure is the combination of a weak Rupee, slower economic growth and higher import tariffs.”
“Eighty-three per cent of executives believe we will see a rise in the price of gold, with zero expecting to see a decline,” says PwC.
“Executives of some of the largest gold companies expect to see the price of gold climb beyond $2000 in 2013.”
Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich, Switzerland for just 0.5% commission.
(c) BullionVault 2013
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