GOLD BULLION prices ticked up to $1224 per ounce in London on Friday, rallying 0.7% from yesterday's new 2014 lows against the Dollar but heading for a third weekly loss in a row.
World stock markets rose – and trading began in New York's biggest ever IPO, online Chinese retail site Alibaba – as the US Dollar pushed the Euro back towards Thursday's fresh 15-month low.
Gold bullion for UK investors meantime reversed an overnight drop to new 2014 lows, hit as the Pound jumped on news that 55% of Scottish voters said "No" in yesterday's independence referendum.
Priced in Sterling, gold this morning fell to £737 per ounce – down £50 per ounce from the shock pollster report of a possible "Yes" vote less than two weeks ago.
"We expect further [gold] weakness through to December," says one bank analyst's note.
"Investor positioning points to further downside."
But in Asia, "Physical demand is very slowly creeping in at these lower levels," says one trading desk [and] when we did break through $1220 early Chinese bargain hunters were waiting to scoop the market."
Trading volume in the Shanghai Gold Exchange's most popular contract today jumped to its heaviest level since June 20th, when Yuan gold prices rose almost 3%.
Yuan prices for gold bullion fell 0.5% to new 2014 lows Friday, but held a $5 premium to equivalent London quotes.
The SGE's new international gold contracts meantime – traded for bullion in Shanghai's free-trade zone – were reported as closing up to $94 per ounce above world prices.
Dealing volume in the FTZ's wholesale gold-bullion contract was barely one-fifth of one per cent of the most active domestic trade.
"Gold demand in China remains slow," says a monthly review from Australia's ANZ Bank, "reflected in low import volumes compared to the buying frenzy of 2013.
"Onshore stocks are elevated, suggesting that weak import demand could persist for the next few months [before the] seasonally strong Chinese New Year period."
Despite recent improvements, gold bullion inflows to India – the former No.1 consumer nation – "are still well below the monthly averages of 2012 and 2013," says French investment and bullion bank Natixis.
Only the United States saw "any notable gain in physical demand in the first half of this year" says Thomson Reuters GFMS in its new Gold Survey 2014 Update, with an 8% increase in jewelry fabrication "driven by weaker gold prices and improving consumer sentiment."
Luxury jewelry-producer Italy will this year become a net importer of gold bullion for the first time since 2008, new London-based consultancy Metallis said in a note on Tuesday.
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GOLD PRICES fell to new 2014 lows Thursday lunchtime in London, extending their drop since yesterday's US Federal Reserve policy decision to more than $20 per ounce.
Trading down to $1216 per ounce, gold prices earlier recorded their lowest London Fix since 2nd January – the first trading day of the year – at $1223.
Asian dealers reported "good physical demand on the move lower", with premiums above London quotes on the Shanghai Gold Exchange rising to $6 per ounce.
Visited today by Chinese premier Li Keqiang, the SGE today launched its new free-trade zone gold contracts, aimed at foreign institutions wanting to deal for Yuan held off-shore.
Gold inflows to India – overtaken by China as the world's No.1 gold buying nation on a raft of anti-import measures in 2013 – are expected to rise as Hindu wedding and festival season demand peaks with Diwali, says Prithviraj Kothari, vice-president of the India Bullion & Jewellers' Association, reaching "about 70-75 tonnes per month in the coming months as against a monthly average of 50-60 tonnes."
"The US Fed," Bloomberg quotes analyst Abhishek Chinchalkar at AnandRathi Commodities in Mumbai, "seems to be slowly preparing the markets to gear up towards an eventual monetary-tightening cycle."
"Any rallies [in gold prices] are unlikely to be sustained as we head closer."
Silver extended the drop in gold prices today, hitting $18.31 per ounce as New York markets opened – less than 10c above June 2013's near 3-year low.
"The markets decided that [the Fed news] was good for the Dollar and therefore bad for precious," says David Govett at brokers Marex Spectron in London.
As expected, Wednesday's Fed statement tapered next month's quantitative easing asset purchases to $15 billion, and repeated that the US central bank will then wait a "considerable time" after ending that program before raising rates from zero.
New forecasts of likely rates in 2016 and 2017, however, showed Fed policymakers targeting higher rates than in their June projections.
Meantime in Frankfurt, and launching its latest long-term lending program with $106 billion in cheap loans to 255 banks across the Eurozone, the European Central Bank today changed its policy-making schedule such that Germany – a staunch opponent of QE money creation – will not vote in two meetings in 2015.
Gold prices for Eurozone investors retreated to Monday's 3-month low at €945 per ounce.
UK gold investors saw the price in Sterling also hit 3-month lows beneath £745 as the Pound rose on expectations of a "No" vote in today's Scottish independence referendum.
"Expectations of higher policy interest rates," says a note from London market-making bank HSBC, "is gold-bearish."
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The U.S. Dollar Index closed last Friday at 84.25. For the ninth consecutive week, the Dollar Index has finished higher than the quote from the end of the previous week. This is the longest string of consecutive weekly increases since the first quarter of 1997.
The U.S. dollar reached its highest level in six years against the Japanese yen.
This is the highest the index has been over the past couple of years except for two days in May 2013.
In reaction, the price of gold fell to a multi-month low and silver dropped to its lowest levels since May 2010.
There are several reasons why the dollar is temporarily strong. The economies across Europe are proving to be weaker than the politicians were pretending, which had encouraged some investors to abandon the euro and replace it with the dollar. The military actions and economic sanctions involving the Ukraine and Russia are also putting more pressure on Europe than the United States. American politicians are still talking about the economic news in the United States being positive rather than negative as several reports (a horrible jobs report for August, mortgage applications are declining precipitously, the percentage of home sales being settled for cash is dropping sharply, a growing number of people qualifying for food stamps, the Federal Reserve’s continuing inflation of the money supply at far higher levels than it is admitting, and so forth) are indicating. This is quieting potential clamor from the public as we enter the final few weeks before elections.
However, behind the scenes, various regulatory changes are coming that are all likely to hurt American financial markets. As they impact the value of other kinds of assets, there will be fallout for the values of gold and silver.
On Aug. 28, the CME Group, which owns the COMEX, NYMEX, GLOBEX and other commodity and financial exchanges in New York and the Chicago Board of Trade and the Chicago Mercantile Exchange in Chicago, announced a change to its Rule 575, which became effective Sept. 15.
- See more at: http://www.numismaticnews.net/article/dollar-up-gold-down-why?et_mid=692339&rid=246216569#sthash.Dig5y3l7.dpuf
Dollar up, gold down; why? was first posted on September 18, 2014 at 6:51 am.
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GOLD PRICES held steady around $1235 per ounce in Asian and London trade ahead of the US Fed's policy statement on Wednesday.
US consumer prices fell in August from July, new data showed meantime, with minus 0.2% marking the first negative monthly inflation reading since spring 2012.
World stock markets ticked higher overall as commodities were flat and major government bond prices rose, nudging yields down.
With one day to go before Scotland's vote on independence from the UK, the British Pound regained last week's sharp loss after pollsters put the "Yes" camp ahead.
Gold prices for UK savers today retreated to unchanged for the week at £757 per ounce.
"Rising rates and a significantly stronger Dollar present headwinds" for gold prices, says a new note from metals analyst Suki Cooper at London market-making bullion bank Barclays.
Those factors "are set to overwhelm any seasonal strength in physical demand this year," Cooper believes, cutting her gold price forecast for 2015 to an average $1180 per ounce – the 3-year low reached twice in 2013.
"The months of August and September," explains Swiss refiner MKS in a trading note, "are typically strong for gold due to upcoming festivals and wedding season" in India – formerly the world's No.1 gold consumer nation.
"However premiums over loco London [gold prices] are currently sitting around $5 per ounce, having been as high as $170 this time last year" after the Indian government first imposed strict anti-gold import rules.
"The 80:20 scheme will continue," today's Hindu Business Line quotes Krishna Pratap Singh, a director at India's Directorate-General of Export Promotion, referring to a rule requiring one-fifth of any new imports to be re-exported before the rest is released to the domestic market.
"We have [already] allowed more banks to import gold...help[ing] cut the premium that jewellers had to pay."
Ahead of the US Fed decision Wednesday, "We would want to avoid taking any positions over the next 48 hours," says a note from US brokerage INTL FCStone.
"But if pressed," it adds – saying today's statement is more likely to leave the Fed's forecast for possible interest-rate hikes from zero until well into 2015 – "we would rather be long gold at this point than short."
Further ahead, and "as the US economy continues to recover and monetary policies in other countries diverge," Bloomberg quotes analyst Yang Xi at Yongan Futures Co. in Hangzhou, China, "the Dollar will remain strong and put precious metals under pressure."
The Eurozone's latest long-term bank-lending scheme will begin Thursday, with the European Central Banking injecting cash in a bid to boost private-sector borrowing.
Beijing today injected $81 billion into China's 5 largest banks according to Chinese reports unconfirmed by the People's Bank.
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If China remains a one-way street for gold, it cannot become the world hub...
SHANGHAI this week launches a new international gold exchange inside the city's free-trade zone, writes Adrian Ash at BullionVault.
Most everyone thinks this is important because "global gold traders [see] the zone as a gateway to China's huge gold demand." But that's the wrong way round. Because if it's to have any real importance, the Shanghai FTZ gold bourse must mark a step towards China's gold output and private holdings flowing out into the world, not the other way round.
Start with the situation today. China and the UK could hardly be more different when it comes to gold. China is the world's No.1 gold-mining producer, the No.1 importer, and the No.1 consumer.
The UK in contrast...and despite spending its way to household debt worth 140% of income...has no gold jewellery demand to speak of. Private investment demand is also tiny compared to Asia's big buyers
On the supply-side the UK hasn't had any gold-mine output worth noting since 1938. Nor does it currently have any market-accredited refineries for producing large wholesale bars.
So you might think China plays a bigger role in the international gold market than does the UK. Yet nearly 300 years since it first seized the job, London remains the center of global gold flows, trading and thus pricing. For now at least.
Since 2004, and with no domestic mine output and next to no end demand, the UK has imported over 6,800 tonnes of gold, according to official trade statistics – more than China but behind India, the former No.1 buyer. It has also exported nearly 5,000 tonnes, more than any country except No.1 bar refiner, Switzerland.
That's in a global market seeing some 4,500 tonnes of end-user demand per year. Because London is the heart of the world's gold bullion market, and the central vaulting point for its wholesale trade. (Same applies to silver, by the way – the UK was the world's No.1 importer and exporter in 2013.)
The relationship with prices is clear. When metal piles up in London's vaults (where its market also offers the deepest, most liquid place for large investors to hold their gold in secure vaults, ready to sell or expand at the lowest costs) prices have tended to rise. But when the rate of accumulation in London is slowing, prices have tended to fall. Gold prices have sunk when London's vaults have shed metal.
On BullionVault's analysis, those months since end-2004 where Dollar gold prices rose saw net demand for London-vaulted gold average 38 tonnes. Falling prices, in contrast, saw London's vaults lose 16 tonnes per month on average (imports minus exports). Exclude the gold-price crash of 2013 and we get the same pattern. Average net inflows when Dollar price fell were only 15 tonnes per month between 2005 and 2012. Rising prices, in contrast, saw London vaults add 48 tonnes net on average per month.
So what's happening with London-vaulted gold really does matter to world prices. Far more, to date, than what's happening to China's flows.
Why? The Middle Kingdom's modern gold boom has come in mining, importing and refining. But in exports it just doesn't figure. Because bullion exports are banned, thanks to Beijing deeming gold to be a "strategic metal".
Never mind that China now boasts 8 gold refineries accredited to produce London-grade wholesale bars. Out of a world total of 74, that's more than any other country except Japan. But Chinese-made wholesale bars never reach London (or shouldn't...) because they are dedicated by diktat to meeting its world-beating domestic demand alone.
Global investment flows are further locked out by Beijing's block on foreign cash coming into China – another key difference between the UK and China in all financial trading, not just gold. Shanghai vaults have therefore been closed to international gold investment to date. So the impact of global flows on pricing has completely passed China by.
This may change this week however, when the Shanghai Gold Exchange launches its new international gold exchange inside the city's huge free-trade zone on Thursday. Six major Chinese banks will provide clearing and settlement services. The first 40 approved members of the exchange include London market makers HSBC, UBS and Goldman Sachs. But whether global investors will choose to hold gold in Shanghai vaults remains to be seen. China remains a Communist dictatorship, after all. Whereas London, even in the dark days of 1970s exchange controls – which barred UK investors from buying gold, as well as moving cash overseas – still freely allowed foreign money to come and go as it pleased, not least through the City's world-leading gold and silver markets.
Remember, China's gold market has only answered Chinese supply and demand so far. Its mine-supply leads the world...but cannot reach it. China's demand has meantime needed imports from abroad to supplement what Chinese mines produce. That demand leapt when world prices fell in 2013, doubling China's net imports through Hong Kong from 2012 to well over 1,000 tonnes, and clearly showing that – for now – its gold market remains a price taker, not a price maker. The running is made instead by free-flowing investment cash choosing to buy or sell down gold holdings worldwide, and that decision shows up in London, center of the world's bullion trade.
Yes, Shanghai's new free-trade zone gold market marks one step towards changing that. Yes, the FTZ is very likely to replace Hong Kong as the stop-off point for gold imports entering the world's No.1 consumer market. But only a truly liberalized gold trade, with foreign cash and gold flowing in...and out...right alongside China's domesic flows will challenge London's 300-year old dominance.
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World Gold Trust Services, LLC, a wholly-owned subsidiary of the World Gold Council, has named William Rhind as its Chief Executive Officer.
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GOLD BULLION prices ticked higher in London on Tuesday, recovering almost 1% from last week's new 2014 closing low as European stock markets followed Asian equities lower.
Crude oil contracts touched a 1-week high in the US and rose earlier in Europe, but only due "merely to the rollover" from the October expiry to the November contract, says Germany's Commerzbank.
Major government bond prices rose, pushing interest rates down, as the US Federal Reserve began its 2-day policy meeting in Washington – widely expected by analysts to end with a cut to QE asset purchases, plus a "hawkish" tone on when the central bank will start raising rates from zero.
"Looming interest rate rises," says the latest Precious Metals Weekly from London-based consultancy Metals Focus, "will continue to discourage investor buying and may in fact lead to modest selling.
But "the turning point for prices is likely to emerge around mid-2015...perhaps surprisingly [because of] interest rate rises in the US" which are likely to be "only modest and slow," Metals Focus believes.
Short-term, says a technical analysis from French investment bank and London bullion market-maker Societe Generale, prices for gold last week "broke the trend line which was running since last December.
"Although the price action looks weak, daily indicators are at support and could pause a little."
"We remain biased to further downside," agrees SocGen's fellow London market-maker Scotia Mocatta in a technical note. "However, we [also] note that bearish momentum indicators are showing early signs of moderation."
"Interest in the physical market," says the commodity team at Australia's ANZ Bank, "appears to be improving from the key importer of India" after August import data showed a year-on-year jump of 176% in gold inflows by value, rising above $2 billion.
Gold bullion imports to India were effectively blocked by strict rules in summer 2013, sparking a flood of smuggling only tempered when new gold import licenses were extended to so-called "star trading houses" in June.
"Gold imports are likely to pick up even further," says another analyst's note, "in advance of the religious festivals of Dhanteras and Diwali in October."
Over in China – now the world's No.1 gold bullion buyer above India – prices rose less quickly in Shanghai than London today, pushing the premium for wholesale metal delivered in China down to $3.40 from Monday's closing level above $5 per ounce.
The Shanghai Gold Exchange announced it's bringing forward the launch of its international Yuan-gold market – hosted inside the city's free-trade zone – from the end of this month to Thursday, citing the diary schedules of senior officials who will attend.
Six major Chinese banks led by ICBC – the world's largest bank by assets – will provide clearing and settlement services to the Shanghai Free-Trade Zone's new gold trading bourse.
The first 40 approved members of the FTZ gold exchange include London market makers HSBC, UBS and Goldman Sachs.
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GOLD PRICES rallied $10 per ounce from a new 8-month low of $1225 hit at the start of Asian trade Monday, trading 0.5% above last week's finish in London.
European stock markets held flat ahead of this week's US Federal Reserve statement on rates and QE on Wednesday, plus the start of the Eurozone central bank's new round of long-term bank financing on Thursday.
Losing 2.7% against the Dollar, gold prices ended last week with their lowest Friday PM Gold Fix in London since 27 December 2013, down at $1231 per ounce.
Silver on Monday held steadier than gold prices, unchanged around $18.65 per ounce to trade some 1.0% above last Thursday's new 14-month low.
"With last year's double bottom of $1180 not too far off," says Jonathan Butler at Japanese conglomerate Mitsubishi, "attention will be on the Fed's comments on Wednesday."
"A hawkish stance" – such as the loss of the words "considerable time" from the Fed's forecast for its likely delay to raising interest rates from zero – "could see further strengthening of the Dollar and potentially a further gold capitulation," says Butler.
"If the market view the Fed’s comments as too dovish, gold could stage a reversal."
"We could see a short-lived technical bounce," reckons Ed Meir at US brokerage INTL FCStone, but "traders will likely use any rallies as a selling opportunity."
In US derivatives, "Some short covering and bargain hunting [was] seen down at the lows overnight," says a note from brokerage Marex Spectron's David Govett in London.
Latest data on US futures and options show speculative traders as a group grew their "short" betting against gold for the 4th week running in the week-ending last Tuesday, taking their "net long" gold position (of bullish minus bearish bets) to its lowest level since mid-June.
Speculative betting against silver prices meantime rose for the 6th week in a row, up to a level only surpassed 3 times in the last 20 years, all in early summer 2014 when the metal began a rapid 16% rally.
"Money managers have contributed to the fall in both gold and silver prices," says the commodities team at Germany's Commerzbank.
"Given that prices have dropped further since the reporting date, net long positions have no doubt also been reduced further."
"The market remains under pressure," Reuters quotes analyst Andrey Kryuchenkov at Russian bank VTB Capital in London, "from expectations for a stronger US currency in the longer run.
"Physical buyers are still absent, unwilling to support prices on fresh lows."
With Tokyo closed for Japan's national Respect for the Aged holiday, "Liquidity was already on the thin side," says the Asian desk of Swiss refining and finance group MKS, "but once the Shanghai Gold Exchange opened up more physical interest began to trickle in - finally!"
Despite slipping from Friday's close in Yuan terms, Shanghai's main gold contract more than doubled its premium Monday to more than $5 per ounce over comparable London quotes.
With Scottish opinion polls meantime putting the "Yes" and "No" camps neck-and-neck for Thursday's independence vote, the British Pound held onto last week's bounce from new 2014 lows.
That cappped gold prices for UK investors at £760 per ounce, some 0.6% above Friday's 7-week low.
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