GOLD PRICES sank as London trade began Friday, dropping 3% and falling the 2013 crash low of $1180 per ounce to set new 4-year lows as the Dollar rose – and world stock markets leapt – following a surprise boost to Tokyo's QE program by the Bank of Japan. Widely expected to leave the asset purchase scheme unchanged two days after the US Fed halted its QE purchases, BoJ governor Haruhiko Kuroda instead raised Japan's annual quantitative easing by one third to $725 billion, citing weak inflation and falling household spending. Japan's $1.2 trillion Government Pension Investment Fund (GPIF) – the world's biggest retirement fund manager – then said it will double its holdings of Japanese stocks to 25% of assets, and also hold a further 25% in foreign equities. The Yen sank near 7-year lows, and the Nikkei soared more than 4%, with European stock markets then adding 2% by late afternoon in Frankfurt. Weaker Eurozone bond prices also rose, but US Treasury bonds fell. Gold priced in Japanese Yen whipped in a 1.7% range but was unchanged by the end of Tokyo trade. Dollar gold prices, in contrast, fell at their fastest pace since October 2013, losing the $1180 level touched twice last year and again at the start of this month – before steadying around $1165 per ounce. London's AM Gold Fix came in at $1173.25 per ounce, the lowest London Fix since 5 May 2010, but the fall was muted to multi-month lows for UK and Eurozone investors as their currencies also fell against the Dollar. Silver meantime fell to dip briefly below $16 per ounce at levels last seen in February 2010. Silver only once fixed above $16 per ounce between 1980 and 2008 in London. "Month-end factors [are] perhaps exacerbating the move," says one commodities analyst, contrasting the drop in precious metals prices with a strong rally in base metals after the Bank of Japan news. "Too many shorts around," says another, pointing to the growing size of bearish speculative bets against gold prices in US futures and options. Turnover in Shanghai's main gold contract was the heaviest since 16 April last year, when the 2013 price crash unleashed record Chinese demand. China's gold consumption fell 21% in the first 9 months of 2014 from the same period last year to 755 tonnes, the state-mandated China Gold Association said today. China's gold mining output – now leading the world since 2007 – rose 14% to 352 tonnes over the same period, the CGA said. After leading Chinese jewelry group Chow Tai Fook reported a 20% drop in same-store sales for July-September, Hong Kong-listed retail chain Tse Sui Lien today said its turnover fell 14% in the six months to August. China's recent surge in precious metals exports is being investigated by customs officials for "round-tripping", says Yicai.com. India's so-called "80:20 rule" – imposed last year to curb gold imports to what was the world's No.1 consumer nation – has also been abused, the Business Standard quotes un-named customs officials. "Several cases of export of substandard or even fake gold jewelry have been unearthed," the paper quotes one source, enabling traders to import more gold – partly explaining the recent surge in India's gold imports data. Western investment managers, meantime, "have not been too keen to participate in the gold market this year," says Swiss bank and London market-maker UBS in a note. "There has been no big theme and price action has been uninspiringly range-bound. [So this new] downward pressure on gold is amplified by the lack of liquidity." Shedding another 1 tonne on Thursday to 741 tonnes, the giant SPDR Gold Trust has now cut its holdings by 7% from what was a 5-year low at New Year 2014. Last year the GLD shed 41% of the record-high 1,350 tonnes held at the start of 2013. Japan's new QE plan, notes Bloomberg, will enable it to buy every new Yen of debt issued by the Japanese government.
Radomski said that RSI indicator is not oversold, so gold can very well fall further. How low can gold go initially? At least to the previous October low or perhaps a bit more lower.
"Overwhelming Bearish Pressure" Drops Gold Price Thru $1200 as US Fed Halts QE, Silver Hits New 5.5-Year Low
GOLD PRICES fell to 3-week lows beneath $1200 per ounce in London trade Thursday, extending this week's drop to 2.4% after the US Fed held rates at zero but tapered the last $15 billion of its monthly QE program as expected. Silver fell harder as broader commodity indices fell 1%, hitting new 5.5-year lows beneath $16.40 per ounce. From the near-$4.5 trillion portfolio built since late 2008, Janet Yellen's Fed committee will continue "reinvesting principal payments" from mortgage-backed bonds as well as "rolling over maturing Treasury securities." Fed research, says Standard Bank forex strategist Steven Barrow, "has suggested the Fed's balance sheet won't be back to normal for at least another five years...[or] a lot longer. "The [equity] market should have little to fear from the end of QE yesterday," Barrow concludes. US Treasury bond prices rose Thursday, pushing 10-year yields down below 2.30% – almost one-quarter point lower from this time last year, before QE tapering began. Gold prices, in contrast, face "overwhelming bearish pressures" according to Swiss bank and London bullion market maker UBS, pointing to this month's low near $1180 per ounce – the 'crash low' hit twice in 2013. "Besides clobbering gold," says US brokerage INTL FCStone analyst Ed Meir, "the Fed policy statement also knocked US equities back, although there was somewhat of a recovery." European equities fell hard Thursday, down 1.6% at one point in Frankfurt, but also rallied as the Euro and Sterling steadied near 3-week lows versus the Dollar. Gold mining stocks meantime sank, with No.1 producer Goldcorp sinking 10% to new multi-year lows after reporting a third-quarter loss and forecasting 2014 output at the lower end of forecasts. Competitors Barrick lost 4% to new 12-year lows despite beating analysts' Q3 forecasts yesterday and reporting a cut in so-called "all in sustaining" costs to $880-920 per ounce mined. Over in China – where Shanghai's main gold contract ended Thursday at a discount to London prices for the first time in 5 weeks – customs officials are meantime investigating a surge in silver exports after bullion shipments were classified as "acoustic wire" for audio equipment. "It's an open secret," Bloomberg quotes analyst Liu Xu at Capital Futures Co. in Beijing, "that a lot of silver exports have been thinly-veiled attempts to profit from tax rebates" worth 17% and intended to boost high-end technology exports. Separate analysis from the Financial Times today says that bad loans at the two largest banks in China – now the world's No.1 gold consumer nation ahead of India – are rising "at the fastest pace in at least seven years" but remain "manageable".
The US Fed just ended quantitative easing. Anyone thinking history or gold worth a look must be a crackpot for worrying... TIME WAS the Gold Standard simply existed...like rain or snooker tables, writes Adrian Ash at BullionVault. Zero rates and quantitative easing are the monetary equivalents today. Doing anything else puts a cental bank into the "hall of shame" according to Bloomberg. The Financial Times gasps that today the US Fed's "grand experiment is drawing to a close..." Oh yeah? The world hasn't yet seen the last of US quantitative easing, we think. Not by a long chalk. QE is getting new life after 15 years in Japan, the world's fourth largest economy, and it has barely begun in the single largest, the Eurozone. Only China to go, and the QE Standard will be truly global. But financial markets and pricing mechanisms the world over are already through the looking glass. After $3 trillion of US Fed asset purchases, climbing back to the other side will take more than a month's rest from extra money printing. The Gold Standard, meantime, now exists only to fill space when financial hacks run out of other silly things to talk about. Take this classic Phil Space nonsense, for instance, from the Washington Post. To recap... Over a week ago, billionaire tech-stock investor and former PayPal boss Peter Thiel appeared on right-wing shock jock Glenn Beck's TV show. He mumbled something about the value of money...reality...and the virtual world of monetary politics we've all lived in since 1971. Nothing to see or hear in that. Even the laziest gold bug can see US president Nixon's decision to end the Dollar's gold link changed nothing and everything all at once. Metaphysical mumblings are the best anyone's since managed in trying to understand how humanity got beyond itself in that moment. Yet on Friday, Thiel's comments were picked up by a right-leaning think tank blogger...and finally last night, this "unthink" piece appeared at the Washington Post online. So what? Well, George Selgin, new Cato Institute director, said earlier this month that anyone challenging the way money currently works must do better if they want to be taken seriously. Amateur bug-o-sphere stuff only makes things worse. But Selgin underplayed the task ahead, I fear. QE, zero rates and unlimited money-supply growth are big, important issues. Today's US Fed meeting proved that once again. On the other side of the debate however, even the most qualified and serious economist daring to doubt the sanity of printing money to buy up government debt, mortgages, stocks or other nation's currencies now looks like a "crackpot" to most politicians, financiers and reporters today. Because, hey! Nothing bad has happened. No inflation, currency destruction or financial apocalypse fuelled by money-from-nowhere. Not yet. And now the Fed is turning off the taps. For now. What could possibly go wrong? We must be crazy to bother owning gold as financial insurance, never mind worrying about how money itself...as basic to civilization as the written word...is being bent and remade in the latest central-bank experiments.
GOLD BULLION prices in London's wholesale market fell near 3-week lows Wednesday as world stock markets and commodities rose ahead of today's US Federal Reserve decision. Silver was firmer, bouncing above last week's closing level at $17.20 to cut the Gold/Silver Ratio of relative bullion prices to a 2-week low beneath 71. "Consensus is the FOMC will abolish its QE program but not elaborate on forward guidance" over raising interest rates in 2015, says Swiss refining and finance group MKS. "Any changing in the wording of the [Fed] statement to suggest later rate hikes will benefit gold and vice versa." "In general," repeats today's note from the commodities team at Standard Bank, "the broader financial markets expect a dovish [Fed statement] today. "We believe that precious metals are also pricing a dovish FOMC...As a result, either the outcome is a non-event, or the risk lies to the downside if the FOMC is less dovish than anticipated." Shedding another 2 tonnes Tuesday, the giant SPDR Gold Trust (NYSEArca:GLD) – the world's largest exchange-traded fund by value at its 2011 peak – was today on course for its biggest monthly outflow of 2014 to date. Losing over 26 tonnes so far in October – some 3.4% of the bullion needed to back its shares at the start of the month – the GLD shed a monthly average of 46 tonnes during the 2013 price crash, then equal to 4.3%. The Russian state, meantime, boosted its gold bullion reserves at the fastest pace last month since its local-government debt default of 1998, Bloomberg reports. Now the world's 5th largest state-owned bullion reserves, Russia grew its gold holdings by 37 tonnes in September to 1,150 tonnes – the largest level since 1993, and equal to 9.1% of the former Soviet state's total foreign exchange reserves. Current president Vladimir Putin set a 10% target in 2006 when first in the Kremlin. "The Swiss National Bank [in contrast] has the liberty of deciding how much gold to hold," notes French investment and bullion bank Societe Generale analyst Robin Bhar today. But next month's Swiss gold referendum – what Bhar calls "a tail risk" for otherwise falling prices – could change that, forcing the SNB to hold 20% of its assets in gold bullion. "If the referendum passes, the central bank would likely buy over a multi-year period," says SocGen's Bhar, forecasting perhaps 2,800 tonnes of new demand at prices of $1000 per ounce, or only 1,500 tonnes at $1500. "I can honestly say the Swiss gold vote is giving me sleepless nights," said Swiss National Bank board member Fritz Zurbrügg to Aargauer Zeitung today. If the initiative is passed, "We will be limited in our monetary policy and our credibility will be damaged."
Byrne said that key driver of gold is negative real rates. There is talk of increase in interest rates by US Federal Reserve some time in early 2015. However, since the governments are in huge debt, raising interest rates actually raises the cost of holding such debt.
GOLD PRICES rose to 3-session highs above $1233 per ounce Tuesday lunchtime in London, recovering more than $10 from an overnight dip to 2-week lows as the Dollar fell following weak US data. With the US Federal Reserve set to taper the last $15 billion of monthly QE asset purchases tomorrow, durable goods orders last month showed a 1.7% drop from August, said the US Commerce Department – the fastest drop in 2014 so far. Some four-in-five economists polled by Bloomberg News expect the Fed to retain its promise of keeping interest rates near zero for "considerable time" in Wednesday's statement. Sweden's Riksbank today took its key lending rate down to zero, and held its deposit rate for commercial bank reserves at minus 0.5% for the 3rd month running. "Monetary policy is aimed at influencing people's behaviour," said Bank of Japan deputy governor Kikuo Iwata told the Tokyo parliament today "It can't be like a train schedule," said Iwata, confirming the BoJ's commitment to QE and zero rates. Silver rose faster than gold prices, touching near-1 week highs at $17.40 per ounce before also easing back. "We still think commodities are pricing a dovish Fed too," says one London trading desk, noting this week's rally from new 5-year lows in broad raw materials indices. "As a result the surprise may come to the hawkish side, relative to expectations." Shedding 15 tonnes last week, the giant SPDR Gold Trust (NYSEArca:GLD) held yesterday at 745 tonnes of gold backing its shares – the smallest amount needed since October 2008. Gold "remains in a downtrend," says Societe Generale analyst Robin Bhar, "but pick-up in physical buying [is] supportive." Retail gold sales in India – the world's No.1 consumer nation until import controls were imposed 16 months ago – last week rose 20-25% from the same Dhanteras festival in 2013, reports The Asian Age from Mumbai. Shanghai gold premiums meantime slipped Tuesday to 25 cents per ounce over London prices, suggesting weak demand and ample supply in China's wholesale market. The strong monthly rise in Chinese gold imports through Hong Kong reported Monday "comes as no surprise," says a note from Standard Bank, "given that the SGE premium was around zero for most of July and August, then pushed up a little to $3 in September, incentivising more imports." Year-to-date howver, "China’s gold imports still undershoot 2013 levels despite a strong start," Standard's commodities team – led by Walter de Wet – goes on. "More broadly, we still believe it will be difficult for Asia to match the gold demand of last year – especially in Q4...[because] market expectations have adjusted to the lower gold price, and gold would need to move lower to spur demand."
In US dollar terms, gold ended the week with a year-to-date (YTD) gain of 2.4% compared to the 6.3% YTD increase in the S&P 500 index and despite a 7.1% increase in the US dollar index.
Rajesh Exports Ltd. anticipated jewelry sales rising between 30% and 40% during Dhanteras, and, as noted by several news reports, gold purchases were running 15% to 20% higher on average for Dhanteras