London Gold Market Report
from Adrian Ash
Thurs 10 Oct 08:25 EST
“Stay Away” from Gold Says Morgan Stanley as India Doubles Silver Imports, China Keeps Buying
WHOLESALE PRICES in Asia and London for physical gold slipped again Thursday morning, dipping back below $1300 per ounce as politicians in Washington mulled a short-term fix to avoid the $17 trillion debt ceiling triggering a government default in one week’s time.
Silver also eased back, trading below $22 per ounce, as world stock markets rose and major government bonds slipped, nudging 10-year US Treasury yields up to 2.70%.
“The inability [of gold prices] to retest recent highs of towards $1350 is a disappointment,” says technical analysis from Scotia Mocatta in New York.
“The one-month trend line (now at 1324) should limit any tentative rebound with 1317 being an immediate resistance,” reckons a chart comment from Societe Generale’s technical team.
Legal inflows of gold to India – the world’s former #1 consumer nation – have been so dented by the government’s anti-import rules that the country’s trade deficit shrank to a 30-month low in September, officials said yesterday.
“This is working out as the government intended,” the Financial Express quotes commerce secretary S.R.Rao after India’s monthly trade deficit came in below $6.8 billion for the first time since April 2011.
Many Indian households have turned to silver says the Economic Times, with silver imports already doubling 2012′s full-year total over the Jan-Aug. period at 4,073 tonnes according to Thomson Reuters GFMS.
“The record high was 5,048 tonnes in 2008,” says the paper.
Households in central China’s Hubei province have meantime grown their gold and silver jewelry demand 41% by value so far this year, the Xinhua agency reports.
The region’s private demand totalled the equivalent of $1.3 billion despite the sharply lower prices compared with the first 8 months of 2012.
Here in London today, the Bank of England followed the US Fed, European Central Bank and Bank of Japan in voting for no change to current policy, holding interest rates at record lows and maintaining its £375 billion ($600bn) quantitative easing gilt-buying scheme.
The Pound bounced 0.4 cents after the news from a new 3-week low of $1.5910. That helped gold move above £815 per ounce.
The last time any member of the UK’s Monetary Policy Committee voted to raise interest rates was July 2011.
Consumer price inflation in the UK has since averaged 3.2% per year, topping the Bank of England’s 2.0% target in all 27 months.
“[US Fed] tapering has been postponed not canceled, and is expected by year end,” wrote Morgan Stanley analysts earlier this week, adding that Washington’s “political stalemate” over the debt ceiling will soon be resolved.
“Consequently, we see little immediate upside to the gold price either in the immediate future or next year.”
“We recommend staying away from gold,” said Morgan Stanley analyst Joel Crane overnight, repeating the investment bank’s 2014 average forecast of $1313 per ounce.
Should the debt ceiling be hit without a resolution one week today, says investment bank and bullion market-maker HSBC in a note, “It is possible that investors move into Treasuries as a safe haven [instead of gold] despite the possibility of US default.”
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.
(c) BullionVault 2013
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