GOLD BULLION touched new 4-month lows for US investors on Thursday, dipping through $1143 per ounce but holding dead-flat in Euro terms as the single currency fell amid news of fresh support for Greece from its Eurozone creditors.
The Dollar rose against most major currencies, but US Treasury bond yields were unchanged, as US Fed chair Janet Yellen continued her semi-annual testimony on monetary policy to politicians in Washington.
Last night’s Greek parliamentary vote to accept a third Eurozone bail-out was meantime deemed “satisfactory” by Athens’ currency partners, and debt interest paid by Greece to Eurozone central banks is being ‘donated’ back to Athens through their national governments, the Banque de France said.
Presenting today’s “no change” decision on rates and QE to journalists in Frankfurt, European Central Bank president Mario Draghi didn’t mention Greece or Athens once in his 1,350-word introductory statement.
But the following Q&A session was however dominated by Greece, with Draghi confirming that his central bank was making extra Emergency Liquidity Assistance loans to Greek banks today.
The ECB “acts on the assumption that Greece is and will remain a member of the Euro area,” said Draghi, adding that – contrary to the German government’s position, but in line with the US-based IMF – “It’s uncontroversial that debt relief is necessary.”
As the single currency fell again, now halving 2015’s earlier 8.5% rally from 12-year lows against the Dollar, gold bullion priced in Euros stuck tight to the €1050 per ounce level now held for 6 weeks.
Meantime in China, premiums above London quotes for bullion on the Shanghai Gold Exchange rose to multi-month highs, reaching $3.30 per ounce for the domestic kilobar contract on heavy volume.
The Shanghai bourse’s ‘international’ kilobar contract in contrast – available since last September to traders using Yuan currency held in offshore accounts – again struggled to find any business, with Thursday’s volume equal to just 0.02% of April’s record.
“India physical gold is still trading at a discount of around $6-7 per ounce,” said a note from Swiss refiners MKS, “where it has remained for the past 2 weeks or so.”
“The fall in the oil price is providing very significant support to major emerging economies,” says French investment and bullion bank Natixis’ chief economist, Patrick Artus, naming amongst others China, India and Turkey – the world’s first, second and fourth largest gold buying nations respectively.
The 50% drop in crude oil from 12 months ago, says Artus, comes “at just the right moment to reduce these countries’ external deficits at a time when global trade was weakening.”
Shares in the biggest oil companies are meantime so “undervalued” they offer”the highest dividend yields since the financial crisis that began in 2008,” reports Bloomberg, with Royal Dutch Shell’s 6.7% “almost double the average for London’s FTSE-100 stock index.”
Currently offering a dividend yield of 2.0%, world No.1 gold miner Barrick (NYSE:ABX) is looking to sell $3 billion of assets to cut its $12.9bn of debt.