London Gold Market Report
From Adrian Ash
WHOLESALE and futures prices for gold dumped 1.8% inside 2 minutes Friday lunchtime in London, extending the week's losses to $50 per ounce at a 3-month low of $1265.
The move came on suddenly heavy volume in the gold futures market, which had previously been quiet after Thursday's fall through $1300.
Silver also fell hard on Friday, and also on a sudden jump in futures trading, hitting a 1-week low at $21.04.
US crude oil contracts lost $1.60 per barrel to $101.40, heading for the fourth weekly loss in five according to Bloomberg data.
"With the US equity markets seemingly giving the prospect of a US debt deal credence by the magnitude of the rally," said Thursday night's closing comment from derivatives exchange the CME Group, "a large portion of the [gold futures] marketplace bought into 'hope' of a deal."
New York stocks closed yesterday more than 2% higher, with Asia and European shares gaining some 1% on average on Friday.
Bondholder insurance on US debt meantime became cheaper, notes Reuters, as credit default swaps on 5-year US notes slipped to 0.3% and 1-year note CDS to 0.6%.
Even with gold below $1300, "Physical buying is fairly non existent," said broker Marex Spectron Friday morning.
"[Investment] funds are staying clear and even the most die-hard bulls are having problems coming up with a reason to buy gold, given its totally lacklustre performance as of late."
Thursday saw the SPDR Gold Trust – the world's largest exchange-traded fund by value in late 2011 – shed a further 1.8 tonnes, taking the volume of gold bullion needed to back its shares to a new 57-month low beneath 897 tonnes.
"The path of least resistance appears to be lower for gold," says a note from investment bank HSBC.
"There is a very well defined bearish trend line with five touches," said fellow London market maker Scotia Mocatta overnight, "which comes in at 1322 today."
New data today meantime showed Japan's money-supply growth ticking higher to 3.7% per year in September.
Consumer prices in Italy and Spain fell last month, official indices said this morning, and were unchanged from August in Germany.
Gold premiums in India – the world's largest consumer market until anti-import rules hit supply this year – jumped sharply this week, rising 8-fold to $40 per ounce above the London benchmark according to the All-India Gems & Jewellery Trade Federation.
Bank of Nova Scotia said today it is in talks with both the Federation and India's central bank to try and attract existing household gold holdings into bank deposits, enabling jewelers to meet demand with domestic supplies.
As it is, however, "There is no official gold available," said Sudheesh Nambiath at Thomson Reuters GFMS, noting the start of India's heaviest gold-buying season, culminating with Diwali next month.
"People are not willing to sell their old jewellery" at current prices, he added. "Availability is largely unofficial [ie, black market] metal, which is being sold into market at a lower rate than the prevailing premium."
Adrian Ash
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.
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