Author Archives: citygold

Stock Market Slump Sees Gold Prices at 11-Week High as UK Plans for 'Unlikely' No-Deal Brexit

GOLD PRICES headed for their highest Friday close in 11 weeks in US Dollar terms in London today, holding onto most of yesterday’s 2.8% jump to trade above $1223 per ounce as world stock markets bounced from their sharpest drop since February.
 
Noting this week’s “sea of red spattered across equity investors’ screens”, bullion traders at Swiss refiners and finance group MKS Pamp see “a confluence of multiple factors – US/China trade tensions, US housing market stalling, upcoming mid-terms, narrowing breadth to the equity rally and concern about how far yields will rise.”
 
As world stock markets fell yet again on Thursday, the volume of Comex gold futures trading jumped 15% above the total number of such contracts now open, according to data from the CME derivatives exchange.
 
Over the last 12 months, daily trading volumes in Comex gold futures have averaged just 49% of open interest.
 
Thursday also saw the number of new accounts opened on BullionVault jump to its highest level since 14 August, when gold prices began a steep drop to their lowest Dollar value since January 2017 at $1160 per ounce.
 
“ETF holdings of gold surged this week after months in decline,” says Bloomberg, noting what has been a 0.4% rise in the amount of bullion needed to back such exchange-traded trust fund structures worldwide.
 
On a weekly basis however, gold ETFs expanded faster in April 2018 – up 0.7% on BullionVault’s analysis of data collated by the mining industry’s World Gold Council – and grew 3 times faster in June 2016 amid the shock of the UK’s Brexit referendum result.
 
Over on the FX market meantime, the Dollar rallied from new October lows versus the Euro on Friday, and also edged the British Pound back from its strongest level in more than 3 weeks as the UK government published its contingency plans for 28 industries in the “unlikely” event that Britain leaves the European Union with “no deal” next March, covering how it would affect the commercial fishing industry to the cross-border movement of race horses and the domestic UK rail network.
 
With London’s FTSE100 stock index down 3.6% for the week so far at Friday lunchtime, the gold price in British Pounds per ounce stood 2.8% higher, adding £25 per ounce from Monday’s dip below £900 – its lowest price since before the June 2016 vote.
 
Chart of UK gold price in Pounds per ounce
 
In the gold-mining sector, shares in Randgold Resources (LON: RRS) added another 3.8% on Friday, taking the London-listed African mining stock 10.0% higher for the week.
 
Randgold has now risen by one-fifth since it announced plans to merge with No.1 global gold miner Barrick late last month.
 
That 20% gain matches the rise in Barrick’s stock – up 9.4% on Thursday – with which Randgold’s current shareholders will be paid if the merger is approved next month.
 
Gold demand in India – the No.2 consumer nation – is picking up, reports Live Mint today, as the Hindu festive season returns following last week’s observance of ‘shradh’ and ahead of next month’s key festival of Diwali.
 
Year-to-date however, India’s gold bullion imports are running 15% below 2017 levels, say specialist analysts GFMS.
 
“In October, again imports will rise due to festivals,” reckons former chair of the All India Gems and Jewellery Trade Federation Bachhraj Bamalwa.
 
With the Yuan meantime slipping 0.7% versus the Dollar since China’s markets closed for last week’s National Day holidays, gold priced in the Chinese currency has risen 2.9%, reaching 6-month highs at Friday’s afternoon fixing in Shanghai.
 
Shanghai premiums over London quotes however – a measure of how local supply is meeting demand inside the No.1 consumer nation – have retreated to $5 per ounce from the typical $9 level.

Gold Price Up as Trump's 'Stock Correction' Worsens, GLD Snaps Longest-Ever Run of No Growth

GOLD PRICES touched a 3-week high of $1210 per ounce in London trade Thursday as global stock markets fell yet again and the US Dollar retreated once more on the currency market.
 
Commodities also fell, with crude oil dropping to new lows for this month at $81 per barrel of Brent but silver edging up with gold prices to touch $14.50 per ounce.
 
Government bond prices stabilized but held longer-term interest rates near multi-month and multi-year highs on German and US debt respectively.
 
“Rising bond yields aren’t always a problem for stocks,” says Jeffrey Kleintop, chief global investment strategist at global brokerage Charles Schwab.
 
“But when bond yields and stock prices moved in different directions it has been a sign of trouble.”
 
Tokyo shares today lost 3.5%, Hong Kong 2.5% and Shanghai 4.8% after New York stock markets closed last night with their worst 1-day drop since February.
 
As Wall Street’s S&P500 index of US corporations fell for the 11th time in the last 15 sessions yesterday, the largest and most expensive gold-backed ETF – the SPDR Gold Trust (NYSEArca: GLD) – grew in size as more investors bought the stock than sold it for the first time in 58 trading days, the longest such run since the GLD was launched in November 2004.
 
That took the quantity of gold needed to back the GLD’s shares up to 739 tonnes, some 1.2% above this week’s 32-month low.
 
Chart of SPDR Gold Trust (NYSEArca:GLD) backing in tonnes of gold. Source: BullionVault via ExchangeTradedGold
 
The cheaper Gold Minishares (NYSEArca: GLDM) – launched by asset managers and SPDR marketing agents State Street in June, and undercutting their larger fund’s 0.40% annual charge with a fee of 0.18% – didn’t change in size on Wednesday, needing 6.1 tonnes of backing.
 
Nor did the Graniteshares Gold Trust (NYSEArca:BAR) – now the cheapest such product once more after trimming its annual charge to 0.175 percentage points this week – needing 7.3 tonnes to back the value of its shares.
 
Annual storage rates for physical gold bullion owned outright, with insurance included, run as low as 0.12% on BullionVault, which now cares for 38.9 tonnes of customer property in each client’s choice of London, New York, Singapore, Toronto or Zurich.
 
“Actually, it’s a correction that we’ve been waiting for, for a long time,” Donald Trump said of the Wall Street slump late Wednesday, after repeatedly taking credit for the US stockmarket’s run of new all-time record highs in 2017 and 2018.
 
“But I really disagree with what the Fed is doing, okay?” the President added to reporters, doubling down on comments he made in July about the US central bank raising its key Dollar interest rate.
 
“I think the Fed is making a mistake. They’re so tight. I think the Fed has gone crazy.”
 
“The fundamentals of the US economy continue to be extremely strong,” added Trump’s Treasury Secretary Steve Mnuchin to Bloomberg overnight, calling the plunge “somewhat of a correction”.
 
First-time claims for US unemployment benefits last week jumped above analyst forecasts, new data said today, but still held near the lowest level since 1969.
 
The latest US inflation figures also missed analyst forecasts however, with ‘core’ consumer prices slowing to 2.2% annual inflation on today’s release of September data.
 
“The situation is very fragile,” said European Commission vice president Jyrki Katainen meantime of the worsening row over Italy’s budget deficit plans, warning that other Eurozone member staes “may suffer from contagion risks” as the price of Italy’s government debt falls, driving Rome’s borrowing costs higher.
 
“Our interest,” Katainen said Thursday, “is to get a result which is credible and try to convince the Italian government to take the responsibility, which lies in their hands.”
 
Looking at Italy’s 10-year yield spread over German Bunds, “The spread was 270-280 [basis points], now it’s 300, because there is great prejudice about this government,” Rome’s deputy prime minister Luigi Di Maio of the anti-establishment M5s Party said overnight, echoing comments from his coalition partner Matteo Salvini of the rightwing Lega.
 
“There are too many people in the establishment who are cheering for a spread of 400 points, but the markets love Italy more than some Italian and European politicians.
 
“My aim is to make my fellow citizens happy.”
 
European shares extended their losses on Thursday, dropping another 1.1% on the Euro Stoxx 50 index and taking London’s FTSE100 3.7% down for the week so far.
 
Gold priced in the Euro today rose back above last week’s closing level of €1043 per ounce.
 
The UK gold price in Pounds per ounce rose 1.7% after slipping beneath £900 per ounce for the first time since before June 2016’s shock Brexit referendum result.

Gold Prices Fall Even as Italy Pays Bond Investors More Than Greece, Brexit 'No Deal' Now Evens

GOLD PRICES failed to hold a rally above $1190 per ounce for the second day running in London trade Wednesday, dropping back as the US Dollar rose and world stock markets fell again amid fresh worries over Italy’s government deficit and the UK’s impending Brexit from the European Union.
 
The Chinese Yuan held its lowest value against the Dollar in 17 months despite a senior Beijing official expressing “optimism” about resolving the tit-for-tat trade war tariffs with Washington.
 
Gold also fell against a weakening Euro, erasing most of last week’s 1.7% gain to trade back down at €1032 per ounce.
 
Milan’s FTSE MIB stock index meantime fell for the 8th session in two weeks, helping pull the EuroStoxx 600 3.2% below last Wednesday’s close, as Italy’s government paid the highest borrowing cost in half-a-decade to raise a 1-year loan from the bond market.
 
Investors locked in a yield of 0.94% on €6 billion of new Italian debt.
 
Greece meantime paid an annualized 0.65% on €625m of 13-week Treasury bills today.
 
Yields on 1-year bonds from all other Eurozone states – including Spain and Portugal – held well below zero, with investors willing to lose 0.59% of their money to hold Germany’s short-term government debt.
 
“Should I change my policies – my agreement with Italians – on the basis of what some speculators decide in the morning? No,” said Italy’s deputy prime minister Matteo Salvini of the right-wing Lega Party today, defending his coalition government’s plan for a 2.4% budget deficit in 2019.
 
Vowing that Italy’s 10-year spread over German Bund yields won’t reach 4 percentage points – a level last seen in the crisis of 2012 – Salvini also said he wants Italian residents to get a tax break on investing in Rome’s debt.
 
The BTP-Bund yield spread today eased back from Tuesday’s peak, but held near a 5-year record above 3 percentage points.

Italy checking all the boxes in terms of how not to react to a building market crisis; demonise “speculators”; draw tempting lines in the sand; impugn those able to provide a backstop; forlorn pleas for locals to buy debt.

— econhedge (@econhedge) October 10, 2018

The gold price for UK investors meantime fell back to £902 per ounce, just above its lowest level since 2016’s shock Brexit referendum result, as the Pound rallied on the currency market amid rumors that a Brussels-London deal for the UK’s exit from the European Union next March could be announced as soon as Monday.
 
With the final summit of EU leaders on Brexit due next week, the Pound reached to a 2-week high against the Dollar and a 4-month high versus the Euro.
 
Chart of UK gold price in Pounds per ounce. Source: BullionVault
 
“Brexit is a serious problem for Scotland,” said Scottish first minister Nicola Sturgeon in a speech to her Scottish National Party (SNP) conference yesterday.
 
After 62% of Scots voted to remain in the 2016 ballot, “The only solution is to become an independent country,” Sturgeon said.
 
Brexit could see UK-EU trade fall in half over the long-term, says a new paper from the IW Institute in Cologne, warning Germany’s giant auto-manufacturers in particular.
 
Leaving the UK is likely to cost London some 5,000 financial jobs said City minister John Glen to a parliamentary committee today, calling the situation “stable” but agreeing with Bank of England estimates.
 
To prepare for “resilience” in local services around the end-March exit, the UK government is now advertising 3 posts nationwide, calling the work “exciting and challenging” and offering to pay 167% of the current UK national average salary.
 
UK bookmakers Coral and Ladbrokes both put the odds of a “no deal” Brexit at evens today.
 
Betting on US interest rates meantime puts a 1-in-4 chance on the Federal Reserve raising the cost of borrowing 4 times of more over the next 12 months, up from below 1-in-10 this time a month ago, according to data from the CME derivatives exchange.

 

Falling Gold Price 'Needs More Volatile Stocks' Plus 'Dollar Crash'

GOLD PRICES failed to hold a $5 bounce in London trade Tuesday morning, dropping back to $1186 per ounce as world stock markets fell with government bond prices, driving longer-term interest rates higher as the Dollar also rose on the currency market.
 
“It [is] a moment to cool down the temperature,” said a European Commission spokesperson on Tuesday as EC President Jean-Claude Juncker met Italy’s Robert Fico, president of the chamber of deputies, to discuss Rome’s planned 2019 budget deficit.
 
But Milan’s stock market hit 7-month lows and the price of Italian government debt fell once again, driving Rome’s cost of borrowing up to a new 5-year record spread over benchmark German Bund yields of 317 basis points.
 
The Euro lost almost 1 cent to hit 7-week lows against the Dollar at $1.14322.
 
That buoyed the gold price for Eurozone investors to €1038, halving Monday’s steep 1.1% drop.
 
“[To reach $1400 gold] you would have to see some real change in the financial markets,” says investment and bullion-bank analyst James Steel, speaking at base-metals conference London Metals Week and saying that gold needs much greater volatility in world stock markets to attract investment flows.
 
“A weaker Dollar would [also] have to be the case.”
 
Averaging -0.49 over the last 45 years, the 12-month correlation between Dollar gold prices and the US currencies trade-weighted forex value last week read -0.85.
 
That figure would read +1.0 if they moved perfectly together, or -1.0 if they moved exactly opposite.
 
Gold’s 12-month correlation with the USD index has now been negative for 334 weeks without break, the longest stretch since global currencies began floating freely in 1973.
 
Chart of US Dollar index (red, right) vs. the gold price in Dollars. Source: St.Louis Fed
 
“The ‘jump to default’ risk is high for US sovereign credit,” reckons gold-miner-stock fund manager John Hathaway at Tocqueville Asset Management, warning of an imminent “30% depreciation of the Dollar.
 
“We believe that the gold market bottomed in August, and that exposure to precious metals is a credible strategy to mitigate risk of a Dollar collapse.”
 
China’s Yuan stabilized versus the US currency on Tuesday, holding around 18-month lows at ¥6.91 per Dollar.
 
That pulled the price of gold delivered in Shanghai back below the equivalent of $1200 per ounce at the city’s benchmark afternoon fixing, a premium of $8 per ounce above global quotes for London settlement.
 
Tokyo’s stock market meantime fell hard as Japan returned from the annual Health & Sports Day holiday, pulling the Topix index 3.5% below last week’s 7-month high.
 
Sterling also retreated versus the Dollar, down over 1 cent as ex-UK minister Steve Baker said “at least 40” fellow Conservative MPs are ready to vote against their leader Prime Minister Theresa May’s proposed Brexit deal for March 2019, the so-called “Chequers Plan”.
 
That failed to outpace the decline in bullion however, with the UK gold price in British Pounds per ounce falling back to £908 – just £7 above last month’s revisit of the cheapest level since mid-2016’s shock Brexit referendum result.
 
“If you think that eventually the forces of anti-globalization will wear trade down to no growth, then the gold market is likely to do well,” says Steel at HSBC.

Gold Bullion Declined Amid China Cuts Banks’ Reserve Requirement & Italy’s Debt Crisis Flares Up

GOLD PRICES fell Monday morning as the dollar held firm after China’s central bank eased its domestic policy to support the economy amid concerns that an escalating trade dispute with the United States could hurt growth.

China’s central bank on Sunday announced a steep cut in the level of cash that banks must hold as reserves. The reserve requirement ratio was cut for the fourth time this year by the People’s Bank of China (PBOC).

PBOC said that the 1 percentage point reserve ratio cut was “reasonable and moderate, and will not lead to depreciation pressure” on the currency.

China’s onshore renminbi rate was weakened by 0.82% to 6.9253 against the US dollar, making  it the biggest daily decline since 19 July 2018.

Stock markets in Asia sank as the CSI 300 Index, which tracks 300 of the largest stocks on both Shanghai and Shenzhen exchanges, dropped by 4.3 per cent, the biggest single-day percentage plunge in 31 months, despite its central bank’s policy move after a week-long national holiday. Japan’s markets were closed for a holiday.

A range of IT stocks in Asia traded at the lowest level since July 2017. It was hit on Friday as investors digested the accusation that China had infiltrated American companies with a hardware hack three years ago as reported by Bloomberg.

“Maybe, the trade war is affecting China more than realised and therefore the need to ease on policy, which dampened demand for gold there,” a Singapore-based trader said.

Betting against gold prices by hedge funds and other ‘Managed Money’ traders last week continued to support the record high on Comex futures and options, according to US regulator’s the CFTC’s data series.
 
Net of that group’s bullish bets, the overall short position reduced 5.4% to the equivalent of 227 tonnes, however the positions have been net short for the 12th week running, the longest period since the format was started in June 2006.

 

Holdings in the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.20 per cent to 730.17 tonnes, on Friday.

Italy’s 10-year bond yield climbed to 3.63% a four-year high as the government refused to bow to criticism over its budget deficit plans by the European Commission.   The spread between German and Italian 10-year yields was pushed above the 300 mark, the widest since 2013.

Columbus Day in the U.S. means no Treasuries trade on Monday. Investors are gearing up for $230 billion of Treasury auctions following Friday’s 10-year Treasury yield hitting its highest level since 2011 and after the unemployment rate dropped to 3.7 percent, a 49 year low.

Shinzo Abe, Japan’s prime minister said Britain would be welcomed into the Trans-Pacific Partnership (TPP) trade deal with ‘open arms’ after it leaves the EU.

Sterling declined this morning against the US dollar after news that UK business are still anxious about Brexit. Firms in the service sector, which represents 76% of UK GDP, have given up hiring staff, according to the British Chambers of Commerce.

Gold prices for UK investors fell below £910 per ounce on Monday afternoon.

A meeting of top U.S. and Chinese diplomats got off to a frosty start on Monday, with U.S. Secretary of State Mike Pompeo and Chinese Foreign Minister and State Councilor Wang took each other to task amid worsening bilateral relations.

“Recently, as the U.S. side has been constantly escalating trade friction toward China, it has also adopted a series of actions on the Taiwan issue that harm China’s rights and interests, and has made groundless criticism of China’s domestic and foreign policies,” Wang said at a joint appearance with Pompeo.    

Pompeo, who was briefing Wang following his visit with North Korean leader Kim Jong Un, said: “The issues that you characterised we have a fundamental disagreement.”

Gold Price Clings to $1200 as ETFs Shrink, Bond Yields Rise, US Jobless Rate Hits Half-Century Low

GOLD PRICES clung to the $1200 level yet again on Friday, heading for a $10 weekly gain as world stock markets fell and long-term US interest rates rose to new 7-year highs.
 
Ten-year US Treasury bond yields held at 3.20% after data from the Bureau of Labor Statistics said US employers added just 134,000 jobs in September – contrasting with Wednesday’s strong ADP estimate.
 
The official jobless rate still fell to a new 48-year low of 3.7% however thanks to the BLS revising up August’s figure.
 
“Plenty of offers up above $1205 saw the yellow metal retreat sharply in Asia,” says one bullion trading desk in a note. 
 
European stock markets then fell for the 3rd day this week after New York hit its sharpest drop since late-June on Thursday.
 
Crude oil edged back but headed for a 2.1% weekly gain in US Dollar terms after hitting new 4-year highs above $85 per barrel of Brent ahead of next month’s block on exports from No.5 producer Iran by sanctions from the US over Tehran’s nuclear program.
 
“It now appears that only China and Turkey may be willing to risk US retaliation by transacting with Iran,” reckons US bank Jefferies.
 
Mergers and acquisition spending in the US oil industry leapt 250% in the July-September period, says data from analysts Drillinginfo, reaching the highest quarterly total since end-2012 at $32 billion.
 
Gold-mining funds were meantime the worst-performing investment funds for UK investors in Q3, says data from FE Analytics data, with four managers losing clients between 15% and 19%.
 
The largest gold bullion-backed trust fund, the SPDR Gold Shares (NYSEArca:GLD), shrank this week to its smallest size since mid-February 2016, losing 7 tonnes as shareholders liquidated stock to need 731 tonnes of backing in total.
 
Chart of GLD tonnes backing. Source: BullionVault
 
The number of GLD shares in issue has now shrunk by 15% since gold prices touched the top-end of the last 5 years’ trading range at $1365 per ounce in April, shedding 128 tonnes of backing.
 
Two new competitor funds launched since then and charging US investors less than the GLD’s 0.40% annual fee have so far accumulated 13 tonnes between them.
 
In September those much smaller ETFs – the 0.18% per year SPDR Gold MiniShares (NYSEArca:GLDM) and 0.20% pa Graniteshares Gold Trust (NYSEArca:BAR) – added 3.3 tonnes according to data from mining-development group (and GLD and GLDM sponsors) the World Gold Council.
 
The GLD shrank by 13 tonnes, while the iShares Gold Trust (NYSEArca:IAU) – which costs 0.25% per year – added 4 tonnes.
 
“The big trend that we’re seeing is people looking at this price weakness and using it as an opportunity to switch out of more expensive gold ETFs into lower-cost ETFs,” reckons Graniteshares’ CEO Will Rhind.
 
“[But] I’m not sure we’re ready to see full-blown re-allocations [to gold] right now.”
 
“Online trading platform BullionVault charges as little as 0.12% per annum for allocated gold,” Bloomberg noted earlier this year – “almost as low as the fee to ‘major investors’ with direct access to London’s specialist vaults of 0.10%.”

Gold Trading Back at $1200 as UK Accuses Russia, US Accuses China of Election Meddling

GOLD TRADING in London saw prices tick higher against all major currencies on Thursday, recovering the $1200 mark for US investors as world stock markets slipped amid fresh geopolitical tensions between the US and China, and Russia and Europe.
 
“China wants a different American president,” US vice-president Mike Pence will say in a speech later today, one week after Donald Trump accused Beijing of “attempting to interfere in our upcoming 2018 [mid-term] election” at a meeting of the United Nations. 
 
Meantime the UK accused Russia’s GRU military intelligence unit of cyber-attacks today, including the 2016 hacking of US Democrat Party emails ahead of Hillary Clinton losing to Trump in the race for the White House – a claim also backed by Australia‘s government.
 
The GRU also targeted the international chemical weapons agency based in The Hague, the OPCW, as it investigated the novichok poisoning in Britain of a former Russian spy, the Dutch government said Thursday.
 
The ongoing US investigation into accusations of collusion with Russian agents by the 2016 Trump election campaign yesterday heard “explosive testimony” according to Republican politicians attending the closed-door hearings, saying that ex-FBI lawyer James Baker revealed “troubling…abnormal…[and] inherent bias” against the Republican Party.
 
Europe and the United States, said US ambassador to the EU Gordon Sondland meantime,  should “clean house” in their “long-term faithful marriage” so they can “deal with Chinese growth, Chinese theft of intellectual property, Chinese malign activity, Chinese militarisation in South China Sea, and all the other things we’ve been calling out to China to stop doing.”
 
With all of mainland China’s domestic currency, gold and financial markets still closed for this week’s National Day holidays on Thursday, Hong Kong equities fell for a third day, hitting new 3-week lows amid widening concerns over the impact of Trump’s heavy US trade tariffs on Chinese goods.
 
The so-called ‘offshore’ Yuan fell through what technical analysts called “support” at 6.9 per US Dollar, with analysts at both Bank of America Merrill Lynch and J.P.Morgan now forecasting further falls below 7 Yuan per Dollar.
 
Chart of gold price in USD vs. Chinese Yuan's Dollar exchange rate. Source: St.Louis Fed
 
“[But] some see the uncertainty emanating from the trade war as temporary only, and remain positive over China‘s long-term outlook,” says China economist Chris Leung at the Singapore government-backed DBS Bank, pointing to a rise in central-bank holdings of the Yuan.
 
With central banks outside China growing the Yuan to 1.8% of their total FX reserve assets by end-June this year – up from 1.2% at end-2017 – “They may actually be adding to their Yuan holdings because the currency has fallen so much,” Leung says, “making it a cheap investment.”
 
Gold trading meantime saw “a quiet session” in Asian on Thursday says a note from Swiss refining and finance group MKS Pamp, 
 
“Gold contained in a narrow $4 range with China remaining on holiday.
 
“[But] since European traders have walked in there appears to be some demand.”
 
Euro gold prices today touched new 7-week highs at €1048 per ounce, up 3.4% from last Thursday’s 32-month low.
 
Italy’s borrowing costs meantime eased back relative to German Bund yields, slipping back below 300 basis points after Prime Minister Giuseppe Conte vowed to start cutting Rome’s budget deficit from 2020.
 
But “if the spread rises, we will not back down,” said Conte’s deputy Luigi Di Maio. “We are aiming for an Italy where the GDP grows.”
 
Russia expects to export a record quantity of natural gas in 2018, because “Europe keeps increasing [its] Russian gas imports,” according to Moscow’s energy minister Aleksandr Novak.
 
Natural gas prices rose in European trading on Thursday, while Brent crude oil edged back from yesterday’s new 4-year highs above $85 per barrel.

 

Gold Price Holds 'Short Covering' Spike in Euros, 'Catching Up with Oil' as Italy-Bund Spread Worsens

GOLD PRICES slipped back from yesterday’s 1.6% short-covering jump on Wednesday, dropping as the Dollar rallied following stronger-than-expected US jobs data.

Spot gold retreated $7.50 per ounce to near $1200 yet again after the private-sector ADP estimate said US payrolls expanded by 230,000 in September, almost 25% ahead of Wall Street’s consensus.

The gold price in Euros held firm above €1040 however as tensions between Rome and the European Union over Italy’s government deficit grew worse.

Silver meantime held firm above $14.65 after spiking to 5-week highs on what traders and analysts also called short-covering by bearish speculators closing out their bets.

European stock markets rallied while crude oil ticked higher near 4-year highs.

“The Russians and the Saudis [have] agreed to add barrels to the market quietly,” says a source quoted by the Reuters news agency, “with a view not to look like they are acting on [US President] Trump’s order to pump more.”

The ratio of gold to oil prices – measured in terms of barrels per ounce – has fallen “below 14 for the first time since November 2014,” says a note from specialist analysts Metals Focus.

“Bullion has some catching up to do against black gold,” agrees strategist Jonathan Butler at Japanese auto-maker and trading conglomerate Mitsubishi.

“We are investing in the smiles of Italians,” said Italy’s deputy prime minister, leftwing M5s lawmaker Luigi Di Maio today – “the desire to spend and to live with a better quality of life.”

Italian bond prices edged higher Wednesday morning, trimming the cost of borrowing for Rome.

But the spread over German Bund yields jumped to 342 basis points on data reported by La Stampa, the widest since May’s 5-year high.

“I think there is someone who wants to bring Italy to its knees to buy companies, banks, food companies, fashion, below cost,” said Interior Minister Matteo Salvini of the rightwing Lega Party to Canale 5 television.

“Someone wants Italy weak and full of immigrants, but with this government it does not work.”

“Reports on various news services say [Tuesday’s $15] gold rally was due to ‘haven buying’ [due to] the Italian budget,” says a note from UK brokers Marex Spectron, calling such claims “utter rubbish” because the Euro also rose on the FX market and the argument between Rome and Brussels has “already been festering for almost a week.”

Instead, gold’s rise yesterday “was purely and simply down to short covering,” says Marex, as the metal’s break back above $1200 “triggered buying” and gold priced in Euros “broke through a resistance point at €1030 [which] triggered some more buying.”

Tuesday’s rise in gold prices saw trading in Comex gold futures contracts jump 69% above its 52-week daily average according to data from the CME derivatives exchange.

Silver trading in Comex futures was more than 95% greater than its 1-year average.

“Despite a third straight week of substantial of short covering, speculative positioning [in silver futures] remains deeply in negative territory,” says Mitsubishi’s latest note on precious metals.

“We may also see some short covering support gold,” the analysis goes on, “[because] Comex non-commercial futures are currently in a record net short position [and] inflationary tailwinds could give gold a boost…as the impact of higher oil prices is digested by the market.”

Alongside the metal’s Euro price, the UK Pound price of gold held firm on Wednesday, trading above £925 per ounce as Prime Minister Theresa May told her Conservative Party’s annual conference that she will end “austerity” in governemnt spending in 2019.

Calling for unity over her “Chequers deal” for next March’s Brexit from the European Union, May could however face a leadership challenge after a backbench MP called for a vote of no confidence.

Euro Gold Price Jumps 3% as 'Anti-EU Fury' Hits Italy Over Budget Deficit

GOLD PRICES rose against all major currencies but leapt versus the Euro on Tuesday as the coalition government in Italy refused to cut its 2019 budget deficit plans in defiance of senior European Union figures.
 
Gold priced in US Dollars rose to 1-week highs above $1202 per ounce, and the UK gold price in Pounds per ounce jumped 1.8% to 3-week highs above £927 as the country’s ruling Conservative Party found its annual conference riven by continued arguments over leadership and Brexit.
 
But the gold price jumped fastest against the weakening Euro single currency, hitting €1042 per ounce – nearly 3.0% above last week’s new 32-month low – as the price of Italian government bonds fell hard, pushing up Rome’s cost of borrowing.
 
The spread between Italian bond yields and German Bund yields leapt back above 300 basis points – the multi-year highs reached duriing this spring’s election crisis – following what Italy’s deputy prime minister, Luigi Di Maio of the anti-establishment 5-Star Movement, called “market terrorism” from Brussels.
 
Denying that the EC is pro-austerity, “I think the Italian government must tell the truth to the Italian people,” said European Economic Commissioner Pierre Moscovici to CNBC today.
 
“More public expenditure can make you popular for a while. But then, who pays in the end?”
 
Chart of the gold bullion price in Euro terms. Source: BullionVault
 
The 2019 budget announced by the coalition of right-wing Lega and M5s parties last Thursday puts Italy’s deficit between government income and spending at 2.4% of the country’s annual gross domestic product.
 
Below the EU’s legal limit 3.0% of GDP limit, it would still grow Italy’s underlying debt-to-GDP ratio – already the worst in Europe behind Greece.
 
“One crisis was sufficient,” said outgoing president of the European Commission Jean-Claude Juncker on Monday, referring to the Greek debt crisis starting in 2010.
 
“We have to prevent Italy from being able to get a special treatment which, if everybody were to get it, would mean the end of the Euro.”
 
Di Maio reacted with what La Stampa calls “anti-EU fury”, lambasting “[this] preventive attack from the European institutions which shows all the prejudices towards Italy” and denouncing Brussels for “market terrorism”.
 
“We are not turning back from that 2.4% target…We will not backtrack by a millimetre,” Di Maio went on.
 
“The package of measures we are developing,” agreed Prime Minister Giuseppe Conte in a post on Facebook, “aims to combine equity and efficiency.”
 
As for leaving the Euro – a move suggested again today by Claudio Borghi, member of the rightwing Lega Party and president of the Lower House’s budget committee – “Italy is a founder member of the European Union and of the monetary union,” Conte said.
 
“The Euro is our currency and it is indispensable for us.”
 
European stock markets held lower on Tuesday afternoon, but Milan’s FTSE MIB index recovered most of an earlier 1.8% drop.
 
The Euro meantime held at 10-week lows on the currency market, helping extend the day’s gains in silver prices to 4.0% for French, German and Italian investors.

Gold Prices Slip as US-Canada Agree New Trade Deal, Italy's Bonds Fall, China Shut for Week-Long Holiday

GOLD PRICES slipped Monday morning, writes Atsuko Whitehouse at BullionVault, dropping to $1185 per ounce as China’s gold market shut for the week-long National Day holidays and the United States reached a “last minute” trade deal with Canada overnight.
 
Tokyo’s Nikkei 225 Stock Average rose to its highest close since 1991, but other Asian markets were quiet with Labor Day in Australia and Hong Kong shut with Shanghai for the National Day holidays.
 
Already agreed with fellow Nafta trade-deal partner Mexico, the new United States-Mexico-Canada Agreement (USMCA) will widen access for US producers to Canada’s dairy market and also cap Canada’s car exports to its southern neighbor.
 
Both the Canadian Dollar and the Mexican Peso jumped on news of the deal, but the US Dollar’s trade-weighted index – measuring its value against a basket of major foreign currencies – held firm ahead of this week’s key US jobs data report, due Friday.
 
“Gold prices remain dependent on the Dollar at this juncture,” reckons Singapore bank OCBC’s analyst Barnabas Gan.
 
“The US economy has been better than expected. Efforts by the Trump administration to reduce the trade deficit [have] been friendly for the greenback as well.”
 
Betting against gold prices by hedge funds and other ‘Managed Money’ traders last week grew for the 11th week running on Comex futures and options, according to US regulator the CFTC’s data series
 
Net of that group’s bullish bets, the overall short position grew 3.9% to the equivalent of 240 tonnes, the heaviest net short in the 3 weeks.
 
Chart of Managed Money long vs. short bets on Comex gold futures and options. Source: BullionVault
 
“Investors acquired new shorts and continued to shed long gold exposure ahead of the Fed’s rate decision, which was expected to yield a hike,” says a note from Canada’s TD Securities brokerage. 
 
Italy’s government bond prices meantime fell for a third session on Monday morning, pushing the yield on 10-year debt up near fresh multi-year highs after the ruling coalition of left and right-wing “populiust” parties made a budget deficit forecast at 2.4% of gross domestic product, three times the previous administration’s target debt-to-GDP target.
 
Italy’s president and its central bank governor on Saturday warned that the country’s debt must remain sustainable.
 
European stocks opened steady but banking stocks fell after La Repubblica reported that the EU Commission will reject Italy’s budget proposal in November.
 
Gold priced in the Euro currency reversed an early drop to trade back up at €1025 per ounce.
 
Silver prices edged down to $14.58 after jumping 2.5% on Friday to hit $14.72, a 4-week high.
 
That kept the Gold/Silver Ratio of the two metals’ prices relative to each other down at 82.7 after reaching 85.1 in mid-September – the highest since March 1995.