London Gold Market Report
from Ben Traynor, BullionVault
Tuesday 2 April 2013, 07:00 EST
Interest in Gold “Disappears” as North Korea Tensions Rise, Silver “Acting More Like Base Metal than Store of Value”
U.S. DOLLAR prices to buy gold dipped
back below $1600 an ounce Tuesday morning, though they remained close
to that level by lunchtime in London, as the physical bullion market
re-opened following the Easter break.
Stock markets edged higher in Europe despite news of record high
unemployment and contracting manufacturing sectors, while major
government bond prices dipped.
“Looking at gold for six months shows the metal making successively
lower lows and lower highs,” says the latest technical analysis from
Scotia Mocatta.
“The last major lower high was $1620…We feel that while this $1620
level holds, the risk is for another drop to $1555 and possibly the one
year low of $1528.”
“We saw buying interest from the general public on TOCOM this
morning,” says one dealer in Tokyo, referring to the Tokyo Commodity
Exchange.
“But then it disappeared. [People] don’t want to buy or sell because of the matters concerning North Korea.”
North Korea said over the weekend that it is in a ‘state of war’ with
South Korea, technically true since the 1950-53 Korean War ended with
an armistice rather than a peace treaty. Pyongyang, which conducted a
third nuclear test in February, has also said it will restart all
facilities at its Yongbyon nuclear complex.
In the south, “people do seem a bit more concerned than before,” says one BullionVault contact based in Seoul, adding that a colleague of his has “bought lots of noodles and canned food ‘just in case’”.
“People’s fear is more based on the fact that the North has done
small attacks in recent years to force a return to the negotiating
table, and that if they do the same again, it could escalate this time
because the South’s new president will need to show a reaction.”
BullionVault‘s Gold Investor Index fell for the third month running in March, figures published Tuesday show, despite the online precious metals exchange seeing its busiest week since mid-
October following the Cyprus bailout news.
The world’s biggest gold exchange traded fund meantime continued to
see outflows Monday. The volume of gold backing shares in the SPDR Gold
Trust (ticker: GLD) fell to its lowest level since July 2011 at just
over 1217 tonnes.
On the Comex exchange, the so-called speculative net long position of
gold futures and options traders, calculated as the difference between
the number of bullish and bearish contracts held by hedge funds and
other money managers, fell by 0.2% to the equivalent of 397.3 tonnes in
the week ended last Tuesday, weekly data published by the Commodity
Futures Trading Commission show.
Silver meantime fell below $28 an ounce Tuesday, trading near
seven-month lows, while other commodities were broadly flat on the day.
“In the past two weeks silver has been performing more like a base
metal and less like a store of value,” says today’s commodities note
from Commerzbank.
“Silver’s underlying demand/supply fundamentals remain weak…inventory
is abundant,” says Standard Bank’s monthly Precious Metals Definer,
estimating that China’s surplus is equivalent to 18 months’ of
fabrication demand.
“The situation within China implies that one of two scenarios should
happen before silver can rise substantially higher on a sustainable
basis: (1) internal demand (fabrication and investment demand) must grow
faster to decrease the stockpiles, or (2) China must become a net
exporter of silver again.”
Standard’s analysts add that the second scenario “would only imply
that the metal has shifted location and not been consumed — the result
of which would be price neutral at best.”
Although the Dollar silver price ended the first quarter down more
than 4%, the US Mint recorded its strongest quarter for silver coins
sales since it began keeping records in 1986.
Over in Europe, the Eurozone unemployment rate hit a record 12% in
January, according to revised figures published this morning,
maintaining that level in February.
Eurozone manufacturing meantime continued to contract last month and a
faster rate than a month earlier, according to purchasing managers
index data published Tuesday. Germany’s manufacturing PMI fell back
below 50, also indicating contraction, while Britain’s PMI fell further
below 50.
India is unlikely to raise gold import duties again, having raised
them to 6% in January, according to the country’s finance minister.
“There are limits to which tariffs can be raised on gold,” P.
Chidambaram told Reuters Tuesday, “because if you raise tariffs
prohibitively, gold smuggling will increase.”
Turkey imported 18.26 tonnes of gold last month, up from 17.34 tonnes
a month earlier, according to data from the Istanbul Gold Exchange.
Turkish gold imports in 2012 were up 51% from a year earlier at 120.78
tonnes. Turkey’s gold exports also jumped last year, with reports suggesting it was using gold in trade with sanctions-hit Iran.
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
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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.
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