Author Archives: citygold

Gold breaks $1200 as Dollar Reaches 13-month High and Turkish Crisis Hits Emerging Markets

GOLD PRICES broke through $1200 per troy ounce, an 18-month low at Monday lunch time amid Turkish crisis pushing the dollar to a 13-month high and ripping through emerging markets currencies as Recep Tayyip Erdogan, Turkey’s president hit out at the US, writes Atsuko Whitehose at BullionVault.

Dollar index (DXY), measuring the value of the Dollar against a basket of six foreign currencies, surged to 96.4070, its highest level since June 2017.  Safe heaven demand for Japanese Yen and Treasuries also rose.  The Japanese Yen strengthened against all major currencies, trading 0.4% up to 110.37 per Dollar, the strongest in seven weeks and the yield on 10-year US Treasuries declines to 2.87 percent, the lowest in more than three weeks.

Global markets opened Monday braced for another hectic day of trading amid Turkey’s unfolding economic crisis, after the country’s currency, the lira, plunged 20% to record lows on Friday following President Donald Trump authorizing a doubling of steel and aluminium tariffs on Turkey and warned that US relations with the country “are not good at this time.”

President Erdogan remained defiant over the weekend, accusing foreign interests of waging an economic war against Turkey, and pledging trade measures to reduce reliance on the Dollar and US markets on Saturday.

The Turkish government then announced limits on currency swaps on Sunday night and following this a large Turkish bank, Garanti, said it would not allow customers to open new foreign exchange positions, making it harder for people to sell Lira for US dollars, pounds and euros.

The Lira pulled back this morning from an overnight record low of 7.24 to the dollar after the central bank pledged to provide liquidity and cut Lira and foreign currency reserve requirements for Turkish banks, although the currency has lost already 43 percent of its value in 2018.

The Turkish central bank has offered no indication that it will raise interest rates to combat high inflation, now reaching over 15%.

“It’s a textbook crisis – for many years everybody had said Turkey was a weak country due to its large external debt and current account deficit,” said Guillaume Tresca, senior emerging markets strategist at Credit Agricole.

“There is nothing surprising other than that the central bank is not really reacting. They issued this new plan but there is no tightening of financial conditions – they are completely behind the curve.”

“The European Union’s financial watchdog [has] expressed concern about EU financial exposures to Turkey. And so, if it is a concern for this institution, then it should be for traders too,” Chris Weston, of online trading firm IG Market in Melbourne warned.

The Euro hit a one-year low of $1.1363 as investors feared that the Turkey’s financial crisis could spread to European markets.

European stocks are down in early trading, FTSE 100 fell 0.49%, Dax dipped 0.53% and CAC40 declined 0.23%.

Asian stock market tumbled further, Nikkei 225 was down 1.98%, Shanghai Composite index fell 0.34%, Hong Kong Hang Seng index declined 1.52% and India’s BSE Sensex was off 0.49%.

The Indian Rupee hit an all-time low of 69.62 against the US Dollar in morning trade.  South Africa’s Rand skidded to levels not seen since mid-2016 and Russia’s Rouble slumped to a near 2-1/2 year low.  China’s Yuan weakened 0.5 percent – its steepest daily decline in nearly four weeks.

“China’s economy is now slowing, emerging markets are now tightening monetary policy and the trade war is escalating. This could worsen investor sentiment towards emerging markets and also strengthens our view that emerging-market growth will weaken.” William Jackson, chief emerging-market economist for Capital Economics in London, said in a note.

MSCI Emerging Markets index fell 1.8%, close to the low not seen in over a year.

Latest data from US regulators say that hedge funds and other large speculators grew their net bearish position on Comex gold futures and options to a new series record again last week.

The net short position of Managed Money increased 54% from the previous week to 196 tonnes.  The short positions were more than 5 times the average since the CFTC began collecting these figures.

The largest gold-backed ETF, the giant SPDR Gold Shares (NYSEArca:GLD) shrank 8.9 tonnes to 786 tonnes during the week starting 6th August.  The holding is at its lowest since end of Feb 2016.  It is down 11% since the peak of 2018 on 30th April soon after Syrian tensions receded.   

 

 

Gold Price Steadies as Russia Fires Back Fresh US Sanctions, US-China Trade War Intensifies &’No-Deal’ Brexit Fears

GOLD PRICES moved sideways in a tight range around $1214 per ounce amid Russia’s strong reaction to the US issuing new sanctions against it with China hitting back against the latest US tariffs and the British pound continuing to plunge on concerns of a hard Brexit, writes Atsuko Whitehouse at BullionVault.

Dmitry Polyanskiy, first deputy permanent representative of Russia to the UN blasted new US sanctions as ‘a theatre of the absurd’ this morning, following the announcement of fresh US sanctions on Russia after determining that it used nerve agent against a former Russian double agent living in the UK.  The new sanctions will take effect on or around 22 August, and relate to the exports of sensitive electronic components and other technologies.

Lawmakers said Russia would respond with counter sanctions, which could include bans on the exports of rockets or resources for manufacturing.

Polyanskiy, also stated “No proofs, no clues, no logic, no presumption of innocence, just highly-likelies. Only one rule: blame everything on Russia, no matter how absurd and fake it is. Let us welcome the United Sanctions of America!

The US had expelled 60 Russian nationals following the nerve agent attack back in March and imposed sanctions in June on five Russian companies and three Russian individuals, who are all prohibited from any transactions involving the US financial system.

The Rouble   fell to its lowest level against the dollar in nearly two years yesterday as the new sanctions were imposed. 

The latest report from World Gold Council, published last week, states that the Russian central bank has been accumulating its gold reserve to a net 53.2 tonnes in Q2, 49% up on Q2 2017. This brought H1 net purchases to 105.3 tonnes, 5% up year-on-year, and gold reserves to 1,944 tonnes at the end of June.  The share of gold in Russia’s total reserves grew from just 2.5 percent to over 17 percent for the last decade.  Russia made it into the top five of gold-holding countries in February.

The report proposes that “Russia’s voracious appetite for gold is strategic – amidst geopolitical tensions it looks to diversify away from the US dollar.”

Russian holdings of Treasury securities declined 84 percent between March and May, falling to $14.9 billion from $96.1 billion in just two months, according to a U.S. Treasury Department report released last month.

The trade war between China and the United States looks set to intensify after China retaliated with $16 billion of new tariffs on US goods on Wednesday, responding to the US release of a finalized list of $16 billion in Chinese goods that will be hit with 25% tariffs on Tuesday.

The yuan has weakened by around 5 percent against the U.S. dollar this year so far.

Turkey’s lira plunged to a record and bond yields climbed as concerns deepened about a rift with the US over the detention of an American pastor and President Erdogan’s influence over the central bank.

Gold prices for UK investors continue to hold their three week high after jumping to £942 per ounce Wednesday as Sterling fell to an 11 month low against the US dollar, at $1.2854 on fears of a hard Brexit.

Sterling has been on a downward trajectory since Liam Fox, the international trade secretary, said last weekend that the probability of a no deal Brexit was now “60-40”. His remarks compounded concerns voiced by Bank of England boss Mark Carney last week. The Bank’s governor said the chances of a no deal Brexit were “uncomfortably high”.

“Some are thinking in the market that the Bank of England raised rates in order to give them ammunition to cut them in the face of no-deal,” said Neil Jones, a foreign exchange expert at Mizuho Bank. “The next move by the central bank could be a cut rather than another hike.” Nomura strategist Jordan Rochester added: “We remain bearish on the pound in the short term until the Brexit mess is out the way…

Asian stocks were mostly positive, Nikkei 225 down 0.2%, Shanghai Composite index jumped 1.8% after declining 24% from its January high, and Hong Kong Hang Seng index advanced 0.9%.

European stocks are down in early trading, FTSE 100 fell 0.6%, Dax dipped 0.1% and CAC40 declined 0.2%.

US crude oil hovers near seven week lows of $66.92, after the first round of the US sanctions against Iran came into effect.  It dropped by more than 3 percent on Wednesday.

The US and Japan will hold their first bilateral trade talks in Washington today.

The US consumer prices for July are due tomorrow.  The US Central bank pays very close attention to this figure in its role of maintaining price stability.  It is expected to be up from June.

Gold Price Drop Spurs ETF Selling, Physical Investor Buying as Trump Warns Over Trading with Iran

GOLD PRICES held in a tight $5 range around $1213 per ounce Tuesday morning in London, moving sideways against a weaker US Dollar as commodities edged higher and Donald Trump issued a warning to other countries over doing trade with Iran – now back under US sanctions over its nuclear research program.
 
With gold prices barely $10 above last week’s 12-month lows, world stock markets followed Wall Street higher, adding over 2.9% to China’s main equity index as the Yuan extended its rally versus the Dollar on the currency market.
 
The UK gold price in Pounds per ounce meantime ticked a 2-week high just below £938 as Sterling fell after both the National Farmers Union and the Association of Police & Crime Commissioners warned against a “no deal” Brexit – now 60/40 likely according to trade minister Liam Fox, “uncomfortably high” odds according to Bank of England chief Mark Carney.
 
Trump’s warning to other countries over the re-applied US sanctions was met by what the White House called “propaganda” from Tehran, where Iranian President Hassan Rouhani said “I don’t have preconditions [for talks]. If the US government is willing, let’s start right now.” 

The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States. I am asking for WORLD PEACE, nothing less!

— Donald J. Trump (@realDonaldTrump) August 7, 2018

Despite the rise in trade and geopolitical tensions, investment in gold-backed trust funds shrank by 1.6% in July new data showed today, pulling their value down to $94 billion, the lowest in 12 months.
 
“Gold price performance was a large contributor to [those ETF] outflows,” says the mining-backed World Gold Council, posting the figures as a PDF, “as it fell over 2% in US Dollar terms.”
 
Private investors, in contrast, grew their physical bullion holdings at the fastest pace since December according to data from BullionVault this morning, with major coin fabricators also reporting a sharp rebound in business during July’s price drop.
 
The largest gold-backed ETF, the giant SPDR Gold Shares (NYSEArca:GLD), yesterday shrank again, reduced by 0.8% as investors sold once again.
 
That took the amount of gold needed to back the GLD’s value down to a new 12-month low at 788 tonnes.
 
The GLD peaked in size with 1,353 tonnes at end-2012.
 
Chart of SPDR Gold Trust gold backing vs. London benchmark price. Source: BullionVault via ExchangeTradedGold
 
Silver’s largest ETF product has also bucked the trend in gold-backed trust funds, with the iShares Silver Trust (NYSEArca:SLV) ending Monday at its largest size in almost a year to need 10,274 tonnes of bullion.
 
Silver outperformed gold prices in London on Tuesday, edging above last week’s finish to trade at $15.46 per ounce.
 
Platinum prices also recovered Monday’s drop, adding 1.9% to near last week’s peak around $840.
 
The Chinese Yuan meantime extended its rally from Friday’s new 15-month low, adding 1.0% versus the Dollar on the forex market.
 
Shanghai prices held unchanged in Yuan terms, showing a premium to London quotes of $4 per ounce – less than half the typical incentive for new bullion imports into the No.1 consumer market.

 

Dollar Up, Gold Prices Down for Longest Run in 24 Years as Comex Bear Betting Hits New Record

GOLD PRICES lost early gains on Monday in London as the US Dollar firmed following further escalations of the US-China trade conflict and re-imposed sanctions on Iran, writes Steffen Grosshauser at BullionVault.
 
Gold bullion slipped to $1207 per ounce in wholesale trade but held above July 2017’s low at $1204, the level reached again on Friday before prices rebounded following news of slowing US jobs growth.
 
Dollar gold prices have now fallen in 12 of the last 16 weeks, matching the metal’s worst runs since the start of 1994.
 
Priced in the Euro, in contrast, gold prices have now held at €1050 for 3 weeks running.
 
Chart of gold priced in Dollars vs. gold in Euros. Source: St.Louis Fed
 
“Gold is still very much being influenced by how the Dollar is moving,” says Singapore-listed bank OCBC’s analyst Barnabas Gan. 
 
“Further downside for gold still appears to be possible especially if the Dollar continues to rally.”
 
“There is a risk in the short term for a dip below $1200 if the current market dynamics persist,” agrees Marcus Garvey, commodities strategist at Chinese-based ICBC Standard Bank.
 
“But looking at the next six months, we are actually around the bottom for this cycle already, so it is more suited in the long term for investors as a decent level for purchasing for their portfolios.”
 
The US Fed’s two remaining rate hikes pencilled in for 2018 “are already, if not fully priced, fairly nearly,” Garvey thinks.
 
“So there isn’t a huge scope for a surprise there.”
 
“It still feels like a test of the psychological $1200 level may be on the cards in the near future,” writes the Asian trading team at Swiss refiners MKS Pamp.
 
“But given how short specs are on Comex, we wonder whether a fall through that level will have legs or just be a good buying opportunity.”
 
Latest data from US regulators say that hedge funds and other large speculators grew their net bearish position on Comex gold futures and options to a new series record last week, equal to a notional weight of 127 tonnes.
 
That ‘Managed Money’ position has been net bearish in only 15 of the 634 weeks since the CFTC began collecting these figures.
 
The average position among money managers has since early 2006 equated to a bullish bet worth 377 tonnes.
 
Chart of Managed Money net speculative position in Comex futures and options. Source: BullionVault via CFTC
 
Silver followed gold prices on Monday and fell after an initial rally to slip through $15.30, down over 10 cents from last week’s close as China’s stock market fell for the 8th session of the last nine.
 
Platinum also retreated again after spiking last week following news that No.2 producer Impala (JSE:IMP) wants to cut output and headcount in a bid to lower costs below current market prices.
 
Impala’s problems are “self-manufactured” claimed South Africa’s mining minister Gwede Mantashe on Friday after its executives apparently failed to join a meeting of 35 other CEOs with government officials to discuss “the future” of the sector.
 
The Chinese government meantime said it would be ready for a “protracted trade war”, proposing retaliatory tariffs on US goods worth $60 billion in response to threats by US President Trump’s government to impose a 25% tariff on $200 billion worth of Chinese imports. 
 
Trump said on Saturday that “playing hardball” on trade is “his thing”.
 
The Chinese state media responded by accusing Trump of a “deceitful drama of extortion and intimidation”.
 
After the Chinese Yuan fell to a 14-month low on Friday, the People’s Bank of China intervened in a move to stabilize its currency, making it harder for domestic traders to bet against the CNY on the forex market.
 
The White House also moved Monday against the government of Iran, re-imposing a wave of sanctions lifted under a historic nuclear agreement signed by Trump’s predecessor Barrack Obama in 2015.
 
Private gold buying in Iran tripled in this year’s second quarter according to data published last week by the mining-backed World Gold Council, rising despite local prices reaching 4-year highs on the collapse of the Rial.
 
“Iran’s weakening economy, growing sense of insecurity and a currency which has almost halved in value, boosted bar and coin demand,” said the report.

'Test of $1200 Coming' as Gold Prices Bounce After Weak US Jobs Data

GOLD PRICES bounced Friday after weaker-than-expected US jobs data, but still headed for the lowest weekly finish of 2018 or worse versus most major currencies.
 
China’s stock market closed the week at its lowest since the end of 2016, down 25% from January’s peak as Beijing readied new tariffs on $60 billion of US imports – costing from 5% to 25% – “subject to…any unilateral threat or blackmail” from the United States.
 
“[That] will only lead to intensification of conflicts and damage to the interests of all parties,” the Chinese government said.
 
The US Dollar meantime eased back from multi-month highs on the FX market after the Bureau of Labor Statistics said the world’s largest economy added 157,00 jobs in July – almost one-fifth fewer than Wall Street expected.
 
Longer-term US interest rates also retreated after the non-farm payrolls report, with the yield offered by 10-year Treasury bonds slipping back beneath 3.0% – a 4-year high when first reached in April.
 
Dipping to new 13-month lows beneath $1205 as London opened for business, gold prices then rallied $10 per ounce after the US jobs data to cut this week’s loss in half.
 
Chart of Dollar gold prices vs. 10-year US Treasury bond yields. Source: St.Louis Fed
 
Average US working hours slipped to 34.5 per week in July, the BLS said Friday, as earnings held 2.7% annual growth.
 
Official unemployment fell back to 3.9% of the working-age population, with separate data Thursday showing the fewest weekly claims for jobless benefits since 1969.
 
“Support comes in at $1204.90, the 1-year low,” says gold price analysis from bullion bank Scotia Mocatta‘s New York office.
 
“Resistance comes in at $1232.40…[and] momentum continues to be negative.”
 
“It feels like it is inevitable now that we will have a test of the psychological $1200 level over the next few days,” said Swiss refining and finance group MKS Pamp’s trading desk.
 
“Record shorts remain in place for Comex specs…a slight bullish lean at present…[but] we have not really seen any slowdown in ETF liquidation over the past weeks which does raise a little concern.
 
“Similarly the USD remains robust, which continues to drive moves in gold.”
 
The Euro earlier fell through $1.16 to its lowest USD exchange rate since end-June, and the Chinese Yuan sank to 15-month lows at worse than ¥6.89 per Dollar before rallying after Beijing imposed a new restriction on domestic FX traders.
 
Premiums for bullion landed in Shanghai held firm near $5 per ounce above London quotes.
 
China’s benchmark gold price in Yuan has now failed to move more than ¥1 per gram either side of ¥268 for nearly 3 weeks.
 
Commodity prices meantime edged higher in US Dollar terms, holding flat from last week’s finish on the Bloomberg Commodity Index to stand 7% below May’s 3-year high.
 
Silver tracked gold prices lower and higher, nearing last month’s 1-year low with a fall to $15.25 before rallying 20 cents per ounce to trade 0.5% lower for the week.
 
Platinum rebounded for the third time this week, overtaking last Friday’s finish to regain Thursday’s spike to $834 after No.2 producer Impala Mining (JSE:IMP) announced steep jobs and output cuts.

Weak ETF + Gold Bars Investing Take World Demand to 2009 Crash Low

GOLD BARS slipped near fresh multi-month price lows in London trade Thursday as the Bank of England raised UK interest rates and new data showed the weakest 6-month demand worldwide since the global economic slump of 2009.
 
Falling against all most currencies bar the Euro and Australian Dollar, gold bullion dropped to $1214 per ounce for US investors, just $3 above July’s 12-month low.
 
UK investors trading wholesale gold bullion bars saw the price rally £5 per ounce to £933 as Sterling fell on the currency market following the BoE’s widely expected decision.
 
“Gold demand stayed soft” in the second quarter of 2018, the mining-backed World Gold Council said in its latest Gold Demand Trends report.
 
“The H1 total is the lowest since 2009…[as] ETF inflows steadied at low levels…jewelry demand dipped…[and] central bank buying also slowed.”
 
Among retail investing products worldwide, gold bars and coin demand “was virtually unchanged” from the April-June period last year “as growth in a few key markets cancelled out weakness elsewhere.”
 
On a rolling 4-quarter basis, total visible demand was the weakest since the 12 months ending Q2 2010 – a period which saw India turn into a net exporter for the first time since the 1930s’ Great Depression as the global economy slumped amid the US-led banking crash.
 
Chart of visible global gold demand, 4-quarter total. Source: BullionVault via WGC
 
Gold bar holdings for the giant SPDR Gold Trust (NYSEArca:GLD) shrank again Wednesday, falling by 4 tonnes as shareholders sold out of the stock.
 
That took the largest gold ETF’s backing down to 796 tonnes, just above July’s 11-month low.
 
Shanghai premiums meantime steadied around $4 per ounce above London gold bar quotes as the Chinese Yuan edged down to new 14-month lows versus the US Dollar on the FX market.
 
“Weaker economic prospects and tumbling currencies off the back of heightened tensions with the US boosted Chinese and Iranian gold demand [in Q2],” says the World Gold Council’s head of market intelligence Alistair Hewitt.
 
But “US investors shrugged off any geopolitical concerns,” he says, with retail bar and coin demand little changed near multi-year lows and North American ETFs recording 2.3% net outflows between end-March and end-June.
 
Household gold demand in No.5 consumer Turkey fell 37% from a year earlier as the Lira sank amid high inflation and low central-bank interest rates.
 
The Lira sank Thursday to a fresh all-time low after the US Trump administration imposed sanctions against the Government of newly-executive president Recep Tayyip Erdoğan over the continued detention of a US pastor for espionage.
 
Iran’s gold demand meantime leapt in Q2 to the strongest level since the start of 2015 on the World Gold Council’s data – compiled by specialists Metals Focus – led by a 3-fold rise in bar and coin buying as Trump quit the previous White House administration’s deal on nuclear research and re-impose sanctions against the theocratic regime.
 

Gold Prices 'Set to Rise' Say Pundits as Best Month of Last 15 Years Begins

GOLD PRICES began August dead-flat from last week’s finish against a falling US Dollar on Wednesday in London, while world stock markets slipped before the latest interest-rate decision and statement from the Federal Reserve.
 
China’s main indices led the drop in global equity prices, losing 2% for the day as Beijing said it won’t respond to the “blackmail” of US President Trump’s new threat of higher import tariffs on Chinese goods.
 
Ahead of today’s Fed announcement – expected to leave rates unchanged but repeat the central bank’s plan for two more hikes in 2018 – new data from the private-sector ADP Payrolls service showed strong growth in non-farm US jobs during July.
 
“The job market is booming,” says economist Mark Zandi of Moody’s Analytics impacted by the deficit-financed tax cuts and increases in government spending.
 
“Tariffs have yet to materially impact jobs, but the multinational companies shed jobs last month, signaling the threat.”
 
“The trade skirmishes evolved into tariff wars and now we are possibly at the beginning of currency wars,” said Reserve Bank of India Governor Urjit Patel today, hiking interest rates for the world’s most populous nation for the second month running to try and strengthen the currency and reduce inflation.
 
Gold priced in Japanese Yen today held near 2-week highs after the Bank of Japan maintained its “ultra-easy” monetary policy on Tuesday.
 
Gold prices today rebounded €10 per ounce for Eurozone investors from yesterday’s drop to a 30-month low of €1036.
 
But the UK gold price in Pounds per ounce slipped once again below £930 as Sterling edged higher before Thursday’s rate decision from the Bank of England – widely expected to deliver only the second rate rise of the last decade to a level of 0.75%.
 
“The big institutions are pretty darn negative on the yellow metal,” said fund manager and celebrity US pundit Jim Cramer on CNBC overnight, “and I think perhaps too negative, which could be tinder for a big rally.”
 
Looking at non-commercial positioning in Comex gold futures derivatives, “The last time the numbers [of bullish over bearish bets] got this low was December of 2015,” Cramer says.
 
“How’d we do if we went long at that moment when not that many people liked it? Boom!”
 
“It’s always darkest before the dawn,” agrees a column on Bloomberg, “and extremely bearish positioning often heralds a turn north.
 
“It’s worth looking at the calendar, too. After January, August is arguably the most consistently bullish month for gold.”
Monthly change, 2003-2017
 
Shanghai’s benchmark gold price fixed at ¥268 per gram on Wednesday, unchanged in Yuan terms from the start of both July and June but recovering to a premium over London quotes of $4.80m – around half the typical incentive for new bullion imports into the world’s No.1 gold consumer nation.
 
So far this week Japan’s latest industrial output data showed a surprise slowdown, China’s manufacturing PMI came in weaker than expected, the Eurozone’s economic growth missed forecasts but inflation rose to a 5-year high at 2.1%, and UK consumer confidence worsened on the Gfk survey as credit-card spending accelerated near February’s 12-year record of 9.6% annual growth.
 
US data has been firmer, with the number of home sales pending in June showing only a 2.5% year-on-year drop against -6.0% forecast, while ‘core’ living costs held 2.2% annual inflation on the Fed’s preferred PCE measure.
 
US worker compensation rose 2.8%, the fastest annual growth since summer 2008 – immediately before the Lehman’s crash and global economic slump.

“Worker pay rate hits highest level since 2008” https://t.co/pMDxHQqcg9

— Donald J. Trump (@realDonaldTrump) July 31, 2018

The Bank of England “should” raise UK interest rates as the City expects tomorrow, says the private-sector NIESR forecaster.
 
But “it is entirely possible that in three months time the August rate increase could look like a mistake” the think tank adds, thanks to poor Brexit negotiations or a worsening global trade war.
 
“The big picture of a trade war and protectionism is that it is a slow death,” says Canadian brokerage TD Securities’ global strategist Richard Kelly, “instead of anything sudden and shocking.”

 

Gold Prices Hit 30-Month Euro Low as Bank of Japan 'Defies' Everyone, Stays 'Ultra Easy' Before the Fed

GOLD PRICES fell below $1220 for the fourth time in a fortnight in London trade Tuesday, hitting new 30-month lows for Euro investors at €1038 as the Bank of Japan sparked volatility on the currency markets by tweaking its “continuous…powerful” QE money creation and asset-purchase program.
 
Vowing to suppress short- and long-term interest rates “for an extended period of time”, the BoJ confirmed rumors that it will allow 10-year Japanese government bond yields to move around its 0% target.
 
It also switched its stockmarket ETF purchases from trust funds tracking the smaller Nikkei index to the much larger Topix.
 
“[These] steps [seek] to alleviate the strain on banks and the market distortions stemming from its policy,” says Bloomberg.
 
But the BoJ will still buy some $53bn of equity ETFs this year, plus over $715bn of Japanese government bonds, and in “stick[ing] to ultra-easy money policy,” says the Wall Street Journal, Tokyo is “defying expectations“.
 
It also “defies [the] global move to roll back crisis-era stimulus” according to the Financial Times.
 
The US Federal Reserve starts a 2-day policy meeting today, with analysts expecting “no change” but a firm promise of further Dollar rate hikes ahead in Wednesday’s decision.
 
Last week the European Central Bank repeated its plan to end Eurozone QE by New Year 2019, and London analysts now put a 90% chance on the Bank of England raising UK rates this Thursday.
 
With the Dollar gold price falling in tandem with the Yen’s FX rate again today, the two assets’ correlation on a 5-week rolling basis has now risen above +0.8 so far this summer.
 
That statistical figure would read +1.0 if gold and the Yen moved perfectly in lockstep, or -1.0 if they moved exactly opposite.
 
On a 52-week basis, gold has now shown a consistently positive relationship with the USD/JPY exchange rate since February 2013 – the longest such stretch since gold and then FX exchange rates began floating in the early 1970s.
 
Chart of gold (blue, right) vs. USD/JPY (red, left). Source: St.Louis Fed
 
In US Dollar terms, spot bullion has now traded 1.4% high-to-low over the last week, but moved just 1.0% against the Japanese Yen.
 
London’s benchmark price has moved 1.0% against the Dollar over the last week, but Shanghai’s benchmark Yuan price has moved barely 0.3%.
 
Tuesday’s news meantime saw the Euro jump almost ¥1 to a 2-week high versus the Yen, and it also rose against the Dollar, nearing its strongest exchange rate in 3 weeks at $1.17.
 
Euro gold prices meantime sank to fresh 2.5-year lows at €1038 per ounce, falling over 8% from end-June’s 12-month high.
 
“I think that the momentum towards the 2.0% is firmly maintained,” said BoJ governor Haruhiko Kuroda of Tokyo’s target for annual inflation in consumer prices – last seen at 0.7% and failing to break 2.0% since the VAT sales tax hike of 2014.
 
“The markets expected the BoJ to show a much clearer path,” says Keiko Onogi, senior bond strategist at Daiwa Securities Co.
 
“There are [only] some small wording changes.”
 
Silver outpaced gold’s drop on the BoJ news, touching a 0.8% loss for this week so far at $15.40 before rallying 10 cents per ounce back to unchanged.
 
Platinum meantime outperformed the monetary precious metals, rallying to $833 to trade 4.9% above this month’s plunge to 14-year lows in US Dollar terms.

Record Bearish Bets Hit Gold Prices Ahead of Japan, Fed + UK Interest Rate Votes

GOLD PRICES dropped back on Monday morning in London ahead of several key central bank meetings this week, writes Steffen Grosshauser at BullionVault.
 
Rumors in Tokyo say the Bank of Japan may ‘tweak’ its QE asset purchase scheme Tuesday.
 
Supported by last week’s strong US GDP data, the Federal Reserve is then expected to restate its plan for 2 more rate hikes in 2018 on Wednesday.
 
The Bank of England is now widely expected to raise UK base rate by 0.25 points on Thursday.
 
Gold today slipped 0.3% from last week’s close at $1224 per ounce but fell harder for non-Dollar investors, while silver traded in a narrow 10-cent range below Friday’s finish at $15.51.
 
Ahead of this week’s central bank news, latest data released Friday said that hedge funds and other ‘Managed Money’ traders in Comex gold futures and options held a record net bearish position overall.
 
In the week-ending 24 July, those leveraged speculators increased their short position, net of bullish bets, by 23% to the equivalent of 84 tonnes of metal, the heaviest net negative betting since current records started in 2006, according to US regulator the Commodities Futures Trading Commission (CFTC).
 
Chart of Managed Money bull and bear bets on Comex gold futures and options. Source: BullionVault via CFTC
 
“Beyond the current weakness,” says a fundamental note from investment and London bullion market-making bank Standard Chartered, “we expect prices to recover as USD strength fades and strong seasonal demand materializes in India in September given the good monsoon forecast.”
 
“[Speculative] positioning remains heavily skewed to the short side,” says a trading note from Swiss refining and finance group MKS Pamp, “with non-commercial shorts remaining close to record highs.
 
“There could be a possibility of a relief rally on the horizon [but] we still believe it is very much a Dollar play.”
 
Most global stock markets started this week lower, with European shares drifting down from Friday’s 6-week high.
 
The British Pound meantime slipped against the Euro but rose versus the Dollar on Monday morning, edging the UK gold price in Pounds per ounce down to new 2018 lows just beneath £930.
 
The US Dollar earlier hit fresh 13-month highs against the Chinese Yuan, “putting pressure on gold prices” according to a trader in Hong Kong.
 
As Comex speculators extended their bearish betting last week, the SPDR Gold Trust (NYSEArca:GLD) held little changed in size, with investor demand growing the fund to need an additional 2 tonnes of backing at 800 tonnes, the second weekly gain in a row after four outflows. 

Gold Prices Down 7 Weeks in 9 as US GDP Jumps, EU Rejects UK Brexit Plan, China 'Needs to Open Up'

GOLD PRICES popped $5 but held on track for the 7th weekly drop in 9 against the Dollar on Friday after new US data matched analyst and President Trump’s forecasts with the fastest GDP growth since 2014.
 
Falling within $6 of last week’s 1-year low at $1211.89 this morning in London, gold prices then bounced above $1224 after the world’s largest single economy reported annual GDP growth of 4.1% for April to June.
 
That was in line with both Wall Street consensus and the “number with a ‘4’ at the front” suggested yesterday by Trump.
 
With domestic cost inflation slowing to 2.3% per year, “The acceleration in real GDP growth in the second quarter reflected accelerations in [personal consumption] and in exports,” said the Bureau of Economic Analysis.
 
Chart of US annual GDP growth. Source: BEA
 
The Dollar slipped following Friday’s GDP news but held near 1-week highs against the single Euro currency after the European Central Bank yesterday failed to give any new details about when it may look to start raising interest rates, currently negative for commercial lenders holding deposits with the ECB in Frankfurt.
 
Stock markets rose everywhere except China, where the CSI 300 index slipped to cut the week’s earlier 2.5% gain by two-thirds.
 
The Yuan last night rallied following rumors that state-owned Chinese banks were buying the currency with Dollars, only to fall to new 13-month lows in late Asian trade.
 
Fixing before the Yuan fell back, benchmark Shanghai gold prices ended the week at a premium of nearly $10 per ounce over London quotes – the strongest incentive for new imports into the metal’s No.1 consumer market since mid-May, and nearly 3 times this week’s previous average.
 
Mainland China’s gold imports through Hong Kong jumped over 40% last month from June 2017 to reach their highest level – net of exports – in 15 months.
 
China’s central bank may also be adding to its gold bullion reserves – now officially the 6th largest national hoard, pushed below Russia by Moscow’s consistent additions – reckons specialist analyst Philip Klapwijk of consultancy Precious Metals Insights in Hong Kong.
 
After starting and then stopping monthly reports of additional gold reserves in 2015, China “probably” finds a “strategic imperative to add some gold to reserves quietly bit by bit,” he tells Bloomberg.
 
Retreating to levels seen a decade ago, the Yuan is now “fairly valued” against the Dollar, said the International Monetary Fund in a new report today, adding that China is “one of the main beneficiaries of the global trading system[ and so] has a strategic interest in playing a leading role in defending it.
 
“[That] means accelerating China’s opening-up, maintaining progress in reducing the current account surplus, and continuing to seek to resolve trade disputes” – now led by US President Trump’s concerted attack on Chinese imports of goods.
 
After the European Commission’s Jean-Claude Juncker this week “ran circles” around Trump in a meeting to discuss US trade tariffs on EU goods, the UK Government was told yesterday to “[stop] wasting their time” trying to convince individual EU states to accept London’s proposed Brexit deal. 
 
“Maintaining control of our money, law and borders also applies to the EU customs policy,” said the EU’s chief negotiator Michel Barnier, using the UK’s own phrases.
 
UK Prime Minister Theresa May nevertheless flew to Vienna on Friday to meet the leaders of Austria and then the Czech Republic – EU member states where anti-EU parties have been gaining in recent polls.
 
The UK gold price in Pounds per ounce today slipped to new 2018 lows at £930 per ounce, dipping below March’s bottom.
 
Versus the Dollar, silver and platinum prices also fell with gold overnight, erasing the week’s prior 1.0% and 2.2% gains respectively.