London Gold Market Report
from Ben Traynor, BullionVault
Monday 22 April 2013, 07:30 EST
Gold’s Action “Dominated by Retail Buying” But Bullion “Not Trading as Safe Haven”
WHOLESALE gold prices rose back above $1430 per ounce Monday
morning for the first time since last Monday’s price drop, amid reports
of strong buying in Asia, while stocks gained and US Treasuries fell.
Silver meantime ticked higher above $23.60 an ounce, though remained
below Friday’s high, while other commodities also gained with the
exception of copper.
Last week’s upturn in physical gold buying in Asia continued over the weekend according to some local press reports, with the South China Morning Post reporting “a rush of buyers” in Hong Kong.
Gold exchange traded funds by contrast continued to see outflows towards the end of last week.
“It remains to be seen which of these offsetting forces eventually wins out and exerts its influence over gold prices,” says Ed Meir, metals analyst at brokerage INTL FCStone.
“Our guess is that the sharp bounce in retail buying will likely
dominate and succeed in sending prices higher over the course of the
next week or two.”
“Gold is still not trading as a safe haven asset,” adds VTB Capital
an analyst Andrey Kryuchenkov, “swinging back and forth in line with
other metals in the precious complex, other liquid commodities and
equities…volumes will remain very thin as players digest the latest
pullback.”
“The aggressiveness of [last week's] fall suggests that we are still
in a consolidation rather in a reversal role,” says Tim Riddell, head of
ANZ Global Markets Research, Asia.
“The $1435 level is likely to provide resistance…we really need to
get back into the $1500s to say that there’s something more substantial
taking place.”
On New York’s Comex exchange, “the liquidation of net speculative
length [in gold contracts] appeared relatively mild [in the week ended
last Tuesday],” says Standard Bank commodity strategist Marc Ground,
referring to money managers’ so-called net speculative long position,
calculated as the difference between the number of bullish and bearish
contracts held.
“Only [the equivalent of] 20.8 tonnes (or 5.8%) were shed over the
week — a long way from the worst we’ve seen this year (90.4 tonnes at
the end of January). relatively strong unwinding of long positions (35.8
tonnes compared to this year’s record of 45.9 tonnes) was softened by a
solid decrease in speculative shorts (15.0 tonnes).”
Ratings agency Fitch meantime has downgraded the UK’s credit rating
from AAA to AA+, following a similar downgrade from Moody’s back in
February. Standard & Poor’s has maintained its triple-A rating on
British government debt.
“Despite the UK’s strong fiscal financing flexibility underpinned by
its own currency with reserve currency status and the long average
maturity of public debt, the fiscal space to absorb further adverse
economic and financial shocks is no longer consistent with a ‘AAA’
rating,” said a statement from Fitch Friday.
“The UK and almost all of Europe have erred,” manager of world’s biggest bond fund Pimco Bill Gross tells the Financial Times,
“in terms of believing that austerity, fiscal austerity in the short
term, is the way to produce real growth. It is not. You’ve got to spend
money.”
Gross adds that investors in government debt “want growth much like
equity investors” and that excess austerity can lead to “recession or
stagnation [causing] credit spreads [to] widen out – even if a country
can print its own currency and write its own checks”.
Over in Italy, the Eurozone’s biggest issuer of public debt, Giorgio
Napolitano has been elected for a second term as president by the
country’s parliament after it rejected the nomination of Franco Marini.
Italian politicians have failed to form a government since the general
election two months ago.
Russia would like to “increase its participation” in negotiations
about Cyprus, the country’s finance minister Anton Siluanov has said,
but will only restructure a €2.5 billion loan in return for protection
of Russian financial interests in the country, Reuters reports.
“Money of our companies has been frozen there,” Siluanov told
reporters at the G20 meetings in Washington at the end of last week.
“We would like this money to reach its recipients.”
Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter,
the UK’s longest-running investment letter. A Cambridge economics
graduate, he is a professional writer and editor with a specialist
interest in monetary economics. Ben can be found on Google+
(c) BullionVault 2013
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.
No comments:
Post a Comment