Gold & Silver Market Morning, July 11 2012
Gold Today – Gold closed in New York at $1,568.40 down $19. Asia took it up to $1,977 ahead of London’s opening at which point it held steady. The morning Fix today was set at $1,576.50 down $20 and in the euro at €1,284.004 down 9€, while the euro stood at €1: $1.2278 down 50 cents. Ahead of New York’s opening gold stood at $1,577.44 in the middle and in the euro at €1,284.46.
Silver Today – Silver was lower in New York at $26.8 before rising higher in London ahead of New York’s opening at $27.10.
Gold (very short-term)
Gold should have a stronger bias today, in New York.
Silver (very short-term)
Silver should have a stronger bias today, in New York.
Price Drivers
Gold & Silver – The brief relief for Spain with the first tranche of €30 billion for their banks was over pretty quickly. Today sees Spain impose another €65 billion austerity cuts into an economy already shrinking rapidly. While sensible and necessary, the danger is that cutbacks will spur greater shrinkage, which we believe it will. Then you have the Catch-22 situation of greater shrinkage leading to a deeper recession, then greater deficit then the need for greater cutbacks. There comes a point where desperation sets in and social unrest becomes ugly. Will this spread to a greater E.U. crisis? It seems to be in Portugal, which is just ahead of Spain in this situation.
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Comex Gold Firmer on Short Covering, Chart Consolidation
Forbes
Comex gold futures prices are trading modestly higher Wednesday morning as the market sees some short covering and chart consolidation amid recent choppy trading conditions. The key “outside markets” are in a bearish posture for the precious metals Wednesday morning, as the U.S. dollar index is firmer and crude oil prices are lower. August gold last traded up $6.00 at $1,557.00 an ounce. Spot gold was last quoted up $0.40 an ounce at $1,555.75. July Comex silver last traded down $0.01 at $27.77 an ounce.
The market place is tilting a bit toward a “risk-off” trading day so far Wednesday, as the U.S. and overseas stock indexes are weaker, while the U.S. dollar index and U.S. Treasury prices are trading higher. The markets are still reacting to Tuesday’s news that Spain’s sovereign debt was downgraded by Egan-Jones. There are concerns regarding the entire Spanish banking system after the European Central Bank reportedly said it will not support funding of the bailout of Spain’s largest bank, Bankia. In other news overnight, a poll shows Greece citizens want to stay in Euro zone. Also, the European Commission reportedly wants more banking union among EU nations.
Reports out of China overnight said China’s new economic stimulus package will not be at all large. That is a bit bearish for the raw commodity market sector.
There continue to be reports of weak physical demand for gold coming from Asia, and that is working in favor of the gold market bears at present.
The main data point of the week is the U.S. jobs report due out on Friday morning. Trading in many markets could be more subdued ahead of that report, and then turn more active in the aftermath of the report. The key non-farm payrolls figure in the jobs report is expected to have gained around 150,000 in May.
The U.S. dollar index is trading firmer Wednesday morning and hit a fresh 21-month high overnight. The dollar index bulls still have upside near-term technical momentum. Meantime, Nymex crude oil futures are lower and hit a fresh 6.5-month low of $89.94 a barrel overnight. Crude oil remains in a bearish overall fundamental and technical posture.
The London A.M. gold fixing was $1,548.75 versus the previous London P.M. fixing of $1,579.50.
U.S. economic data due for release Wednesday includes the MBA weekly mortgage applications survey, the weekly Goldman Sachs and Johnson Redbook retail sales reports, and pending home sales.
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China to Surpass India as Top Gold Buyer: Industry
Yahoo
China is set to overtake India as the world's largest gold buyer this year as demand for the metal for jewelry and as a safe-haven investment surges, the World Gold Council said Thursday.
Global demand hit 4,067.1 tonnes in 2011 -- edging up 0.4 percent year-on-year -- worth an estimated $205.5 billion, the first time demand has surpassed $200 billion, the WGC said in its latest annual report.
Gold prices rose to a record over $1,920 an ounce in September on frenzied buying by individuals, investment funds and central banks in the aftermath of a US credit rating downgrade and plunging global equity markets.
Prices have slipped since but still hover around $1,700 per ounce.
India, the largest gold consumer and importer, saw a 7.0-percent decline in demand year-on-year to 933.4 tonnes last year, while demand from China jumped 20.0 percent to 769.8 tonnes in the same period.
"There was a major boost to the overall demand from China, a trend we see continuing in the new year," said Marcus Grubb, WGC's investment managing director.
"It is likely that China will emerge as the largest gold market in the world for the first time in 2012."
India and China, which have been battled high inflation, combined account for more than half of the world's gold demand.
India, where gold is widely purchased for religious and ceremonial occasions, consumed less of the yellow metal in 2011 largely because of a weak rupee, which made imports of gold -- priced in dollars -- more expensive.
"The domestic currency fell precipitously in the second half of 2011, on foreign capital outflows. The rapid rise and fall in the rupee and resulting local gold price swings impacted gold buying," the report said.
India's gold demand was down 27.0 percent year-on-year in the second half of 2011.
The WGC said it expects global demand for gold to remain strong in 2012.
Despite the recent softening in demand, India is likely to record steady demand for gold this year, in-line with 2011 trends, analysts and the WGC said.
"The sentiment is likely to remain upbeat this year as inflation is moderating and various tax incentives are likely to support purchases," WGC's Middle East and India managing director Ajay Mitra told reporters.
Analyst Hareesh V. of research firm Geojit Comtrade expects India's gold demand to rise marginally by 2-3 percent this year.
"India could consume close to 965 tonnes in 2012, with the rupee rising against the dollar and inflationary pressures easing, which would boost the import of gold," Hareesh said.
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Gold Up on China, Inflation Concerns; Greece Eyed
Reuters
Gold rose on Wednesday after Chinavowed to continue to invest in euro zone government debt, increasing gold's appeal as a hedge against inflation fueled by ample liquidity in the financial system.
Bullion broke ranks with the euro and U.S. equities, even though it was off session highs as the dollar recovered losses on news euro zone finance officials are looking to delay a second bailout program for Greece.
The metal rose as much as 1 percent after China's central bank governor said China and other emerging nations such as Brazil, Russia or India were waiting for the right time to help the euro bloc, but there were no concrete promises on fresh funding.
"For China to make a commitment like that is enough to give gold the psychological boost and to...increase the potential for inflating commodities and precious metals prices," said Jeffrey Sica, chief investment officer of SICA Wealth Management with more than $1 billion in assets.
Spot gold was up 0.4 percent at $1,725.79 an ounce by 3:04 p.m. EST (2004 GMT).
U.S. COMEX gold futures for April delivery settled up $10.40 at $1,728.10. Volume was about 30 percent below its 30-day average, in line with its recent pace.
Gold was lifted by crude oil's gains, while the euro and Wall Street fell after initial rallies fizzled.
The metal, though viewed as a safe haven, has tracked the fortunes of riskier assets in the past few months, as market turbulence caused by the euro zone debt crisis forces investors to sell gold to cover losses elsewhere.
"The correlation between gold in the short term and some of the risk markets is higher than people probably expect," said Pau Morilla-Giner, head of equities, commodities & alternative investments at London and Capital Asset Management.
"Gold continues to trade about 60 to 70 percent of the time as an alternative currency, which clearly has to do with being a better store of value than nominal currencies that are being abused by excessive quantitative easing (QE) across the board," he added.
A few Federal Reserve officials in January believed another round of central bank bond buying would be needed before long to support the U.S. economy, but others dissented, minutes of the Fed's last meeting showed.
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China’s Banks Lure Man on the Street to Gold
Reuters
For Chinese shipping executive Ping Bo buying gold is the best way to protect his family's wealth and give his 10-year-old son a headstart into adulthood.
"For my son, the idea is that he will get a nice stash of gold that he can cash out when he turns 21 or when he gets married," said Ping, one of over 2 million people that have opened accounts in the past two years to accumulate gold at the Industrial and Commercial Bank of China (ICBC).
The ICBC launched the accounts in April 2010. The gold that it has bought to back them is only a fraction of total Chinese demand, but the explosive growth in the number of investors that have signed up is a symptom of the wider demand for the precious metal in the world's most populous country.
China, expected to overtake India as the world's top gold consumer in the next few years, accounted for 23 percent of the world's total consumer physical gold demand in the first three quarters of 2011, up from 19 percent in 2010, according to the World Gold Council (WGC).
Growing wealth in a traditional culture that favors gold, economic uncertainty and looser regulations on the domestic gold market together have combined to create rapid growth in China's gold demand.
The accounts are one of a range of methods that China's banks have come up with that allow small investors like Ping access to the gold market.
Investors buy as little as a gram a month through the accounts, a tiny quantity but one that adds up when the middle class of the world's most populous country is involved.
"It's a fantastic way for me to accumulate gold," said Shanghai-based Ping.
ICBC's accounts drew 2.33 million investors by the end of November, according to the bank, just 19 months after the launch, with 22 tons of gold held to back them.
Agricultural Bank of China said that for a similar product launched in September, more than 70,000 clients signed up to buy a minimum of one gram of gold per month.
"The product will retain its vitality as long as the demand for physical gold investment keeps growing," said the bank in a written reply to a Reuters enquiry.
The ability of China's banks to keep money flowing into bullion investments will play a major part in supporting gold prices this year, after spot bullion pulled back to around $1,660 an ounce from a record above $1,920 in September.
"The Chinese really love gold," said Shi Xudong, deputy head of the Administration Office of the Precious Metals Department at ICBC (1398.HK) (601398.SS).
"The fact that the government has started to clean up the gold market is favorable to our business, as investors who have been trading on illegal platforms will need to look for new investment platforms."
He referred to a recent statement from China's central bank on cracking down on informal gold exchanges outside the Shanghai Gold Exchange and Shanghai Futures Exchange.
ICBC, the biggest among the country's commercial banks in precious metals, also offers paper gold, a way for investors to buy and sell without taking physical delivery, and allows retail investors to trade on the Shanghai Gold Exchange through its platform.
In the first 11 months of 2011, the bank's clients traded 295 tons of gold on Shanghai gold forward contracts and 615 tons on paper gold. In 2011, the bank sold 50 tons of physical gold products and 70 tons of silver products, ICBC said.
CHINA GOLD DEMAND TO RETAIN HIGH GROWTH
In the first three quarters of 2011, China's jewellery demand shot up 34 percent on the year to 376.8 tons, while demand for coins and bars surged 89 percent to 204.1 tons, according to the WGC.
Albert Cheng, Managing Director of the WGC, Far East, estimated total jewellery consumption would grow to 500 tons and physical investment demand exceed 250 tons in 2011, which would bring total demand up at least 18 percent from a year earlier.
"In 2012, both investment and jewellery demand will retain growth, albeit at a lower pace," Cheng told Reuters in an interview.
He estimated that investment demand would grow 25-30 percent, and jewellery demand 6-10 percent, in 2012.
Volume on gold derivative trades could be 15 to 20 times physical investment demand, Cheng said.
As a sign of surging demand for bullion, China's gold imports from Hong Kong in the first 11 months of 2011 more than tripled on the year.
China has one of the world's highest saving rates, and the public faces few investment options. A volatile stock market and a property market under government crackdown are driving investors to seek alternative investment choices.
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Gold Rises for Fourth Day – IMF $500 Billion Hopes Create Concerns
Seeking Alpha
Gold’s London AM fix this morning was USD 1,664.00, GBP 1,076.53, and EUR 1,289.62 per ounce.
Yesterday's AM fix was USD 1,657.00, GBP 1,077.09, and EUR 1,290.80 per ounce.
Cross Currency Table - Bloomberg
Spot gold rose on Thursday in Asia and has consolidated on those gains on somewhat subdued trading conditions.
There are hopes that new flows of funding from the International Monetary Fund will help contain the euro zone debt crisis. However, some investors are concerned that the funding is another form of short term debt based panacea and a further currency debasement.
IMF officials from twenty nations are set to hammer out a plan at a meeting in Mexico on Thursday and Friday. Another multibillion or even trillion dollar monetary injection into the global financial system may further boost demand for bullion.
XAU-GBP Exchange Rate - Bloomberg
The duty hike in India has decreased gold prices by 1% in Mumbai as the rupee gained 0.5% against the dollar.
Some jewellers think the recent duty may slow down demand and may result in a decrease in imports from the official channels of about thirty banks. The increased tax may also lead to a tertiary market where people trade amongst themselves and not through dealers.
Traders still do not see the hike dampening the demand for the yellow metal. India is the world’s largest importer of gold and its households have the largest holdings of the metal, according to data from the World Gold Council, although Chinese households appear to be catching up in their purchases of gold.
Global Gold Demand by World Gold Council - Reuters
In both China and India, gold is popular for cultural, historical and financial reasons.
Gold is seen as a safe haven that will preserve a family’s wealth over generations. There is more trust in gold bullion than paper assets such bank deposits, stocks and bonds as they have protected Chinese, Indian and people throughout the world from periods of deflation (banks and governments can go bust) stagflation (paper money and bonds lose value), and hyperinflation (paper money and bonds really lose value).
While western countries have not experienced the ravages of high inflation, many African (Zimbabwe recently), Middle Eastern (Iran today) and Asian (Thailand, Vietnam, Indonesia, India and many others) economies have.
It continues to be imprudent to ignore the real risk of today’s inflationary monetary policies by western central banks.
With currency debasement continuing globally, gold remains an essential asset to own.
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Asia Skyscraper Building Boom May be Sign of Impending Economic Collapse, Warn Experts
The Independent
A skyscraper building boom in China and India may be a sign of an impending economic collapse, according to financial experts.
Barclays Capital has mapped an "unhealthy correlation" between construction of the world's tallest buildings and looming financial crises over the last 140 years, including the Great Depression and the Asian financial crisis.
Today, China is home to over half the 124 skyscrapers now under construction worldwide.
India, which has just two skyscrapers, is building 14, including the world's second tallest tower, in the financial capital Mumbai.
Barclays said the clusters of building activity usually coincide with periods of easy credit, excessive optimism and rising land prices, which often occur before market corrections.
"Building booms are a sign of excess credit," Andrew Lawrence of Barclays Capital in Hong Kong, said.
Historically, skyscraper construction has been characterised by bursts of sporadic, but intense activity that coincide with easy credit, rising land prices and excessive optimism, but often by the time skyscrapers are finished, the economy has slipped into recession, Mr Lawrence said.
The Great Depression hit as the finishing touches were being put on three record-breaking buildings in New York: 40 Wall Street, the Chrysler Buildingand the Empire State Building, which were all completed between 1929 and 1931.
The economic and oil crises of the 1970s coincided with the completion of the twin towers at New York's World Trade Centre, in 1972 and 1973, and Chicago's Sears Tower in 1974.
The Asian financial crisis hit as Kuala Lumpur's Petronas Towers were finished in 1997.
Dubai's $4.1bn Burj Khalifa, completed in 2010, is now the world's tallest building. As it was being built, Dubai nearly went bust and the world slid into the Great Recession.
"Thankfully for the world economy, there is not currently a skyscraper under construction that is planned to overtake the height of the Burj Khalifa," the report said.
However, signs of trouble are escalating in China and India.
Today, China has the dubious distinction of being the world's "biggest bubble builder," as it erects ever more and ever higher towers, Barclays said. Home to 53% of the 124 skyscrapers now under construction globally, China is primed to increase its stock of skyscrapers by 87%.
About 80% of new buildings are going up in tier two and three cities, away from developed coastal areas of the Pearl River Delta and Yangtze River Delta, which Barclays called "evidence of the expanding building bubble."
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Gold hits new high as debt talks stall
(Reuters) - Gold rose to fresh record high on Monday as talks over lifting the debt ceiling appeared to be stalling just days before the August 2 deadline, raising the prospect of a debt default.
Spot gold climbed as high as $1,622.49 an ounce versus Friday's high of $1,607.01 and the previous record of $1,609.51 before easing back to $1,614.66 by 0007 GMT, Reuters data showed.
President Barack Obama and congressional leaders struggled late on Sunday to break a partisan deadlock on a budget deal and bullion dealers said investors were ditching stocks in favor of safe haven assets, such as gold, until the outcome of talks become clearer.
A slightly weaker U.S. dollar at the start of early trading in Asia gave gold its initial lift, though bullion continued to firm even as the greenback later stabilized, according to bullion dealers.
"Gold is moving on its own," a dealer said.
U.S. gold also hit a fresh record high at $1,624.30 an ounce.
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Gold Reaches $1,400 After Asian Equities Rebound
Proactive Investors
Sergei Balashov
Gold prices rallied today, reclaiming the US$1,400/oz level as traders ceased selling the yellow metal to cover up losses in other assets as stock markets in Asia recovered following a two day sell-off on the nuclear crisis in Japan.
Radiation around the Fukushima nuclear plant has again reached dangerous levels this morning, forcing the evacuation of rescue workers from the site.
International Atomic Energy Agency’s director general Yukia Amano criticised the Japanese government for failure to provide timely updates about the state of failing reactors at Fukushima, calling for stronger communication.
Gold last traded at US$1,403/oz.
Silver and platinum followed, surging to US$34.78/oz and US$1,703/oz respectively.
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Gold Rises on Signs Drop Yesterday to One-Month Low Was Overdone
Bloomberg
Pham-Duy Nguyen
Gold rose in New York amid speculation that yesterday’s decline to a one-month low was overdone.
The metal dropped 2.3 percent yesterday following a slump in equities and commodities. Japanese stocks rose today for the first time in five days as the nation attempts to prevent a nuclear disaster following last week’s deadly earthquake and tsunami.
“Some of the panic-selling that we saw yesterday is subsiding,” said Matt Zeman, a market strategist at Kingsview Financial in Chicago. “The commodity’s bull run is not over, and people are looking to buy gold on dips.”
Gold futures for April delivery rose $3.30, or 0.2 percent, to settle at $1,396.10 an ounce at 1:39 p.m. on the Comex in New York. Yesterday, the price touched $1,380.70, the lowest since Feb. 17. Gold reached a record $1,445.70 on March 7.
Silver futures for May delivery rose 33.5 cents, or 1 percent, to $34.472 an ounce on the Comex. Yesterday, the price fell as much as 6.3 percent to $33.565. The metal has almost doubled in the past year.
Palladium futures for June delivery climbed 15 cents to $705.05 an ounce on the New York Mercantile Exchange. Platinum futures for April delivery fell $5.10, or 0.3 percent, to $1,700.50 an ounce on the Nymex.
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