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Comex Betting on Gold Price +160% as US Debt Ceiling 'Risks Blocking' Fed QE Unwind

August 1, 2017
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GOLD PRICES held below Friday’s 7-week closing low near $1270 per ounce in Asian and London trade Monday, edging back as the US Dollar rallied from 30-month lows versus the Euro currency despite news of stronger than expected jobs growth and inflation across the 19-nation union.
 
Silver rose to set new 5-week highs at $16.88 per ounce while commodities held flat overall.
 
World stock markets edged higher as major government bond prices slipped, nudging 10-year US, German and UK bond yields 0.01 percentage point higher.
 
New US Treasury secretary Steve Mnuchin told lawmakers leaving Washington for the summer recess on Friday that they have until 29 September to agree a rise in the US government’s legal debt ceiling or risk a shutdown in key departments.
 
Neither the House nor the Senate are now in session until Tuesday 5 September, giving just 2 weeks of business time after they return from holiday.
 
Nearing $20 trillion, US federal debt has grown by one-third since the 2011 debt ceiling crisis, when ratings agency S&P downgraded Washington’s standing from ‘risk free’ AAA for the first time – a move yet to be reversed – and Dollar gold prices jumped towards their current all-time record highs above $1900 per ounce.
 
Chart of US Federal debt, year-on-year change vs. gold priced in Dollars
 
“Look at how the Dollar moved up when it was felt that the Trump election was going to lead to happy days again,” says John Snow, Treasury secretary under George W.Bush and now chairman of asset manager Cerberus Capital.
 
“[Today] it looks like the administration’s ability to get things done, like infrastructure spending and tax reform and health-care reform, are not being realized.”
 
“This is an administration that has shown it can’t get anything done. Absolutely nothing,” the FT today quotes Mark Zandi, chief economist at S&P competitor Moodys Analytics.
 
Looking at the Federal Reserve’s plans for start unwinding its $4.5 trillion QE holdings of US Treasury and other bonds as soon as its September meeting, “The biggest risk is the debt limit and any tightening of financial conditions,” said Bank of America Merrill Lynch rates strategist Mark Cabana last week.
 
Betting on the US central bank keeping its key Fed Funds rate below 1.25% until the start of 2018 has jumped over the last month, raising probability implied by interest-rate futures contracts from 39% to 54% according to data from the CME Group.
 
Betting on gold prices rising last week leapt 160% net of bearish bets amongst the ‘Managed Money’ category of Comex traders, data from US regulator the CFTC showed Friday.
Chart of net speculative betting by Managed Money and the 'non-reportables' category in Comex gold futures and options. Source: BullionVault via CFTC
 
The fastest increase since January 2016 in the net long position of hedge funds and other money managers, it took that category’s overall bullish betting back to the strongest level since late June, reversing the previous 4 weeks’ drop to the smallest level in almost 18 months.
 
Over the last 11 years of available data, the net speculative long position of Money Managers in Comex gold futures and options has shown an average weekly correlation of 0.74 with gold priced in Dollars – highly significant on a statistical basis.
 
That figure would read 1.00 if they moved perfectly together, or -1.00 if they moved exactly opposite.

Gold Price Hits New 6-Week USD High as GDP Grows, Inflation Sinks, GLD Shrinks

July 28, 2017
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GOLD PRICES jumped to breach yesterday’s 6-week Dollar highs above $1265 per ounce Friday lunchtime in London as the US currency fell yet again on the FX market following very mixed GDP data from the world’s largest economy.
 
Annualized US growth in gross domestic product matched Wall Street forecasts, jumping to 2.6% between April and June from the first quarter’s 1.2% pace and led by a surge in consumer spending, the Bureau of Economic Analysis said.
 
But price inflation came in well below analyst predictions, slowing to just 0.3% on the PCE measure – closely watched by Federal Reserve policymakers – from the previous pace of 2.2%.
 
Silver outperformed gold prices as the Dollar fell back towards Thursday’s 14-month lows against the world’s other major currencies, gaining 1.1% for the week at $16.71 per ounce.
 
Platinum held lower, down more than $3 per ounce at $931.
 
Eurozone government bond prices slipped meantime, nudging longer-term interest rates higher for the 19-nation currency union after member states Spain and Greece reported stronger-than-expected GDP growth.
 
“Longer-term investors continue to be attracted to gold as a means of diversification and to hedge against rising uncertainty across other asset classes,” says a new note from French investment and bullion market-making bank Societe Generale, looking at “relatively little changed” holdings of gold-backed ETF trust funds worldwide.
 
The largest such product however, the SPDR Gold Trust (NYSEArca:GLD), yesterday saw its fifth daily outflow of metal in a row as shareholders again liquidated stock.
 
Shrinking by more than 7% since this time in June, the GLD has now seen its second-worst ever month-on-month investor outflows against a backdrop of rising gold prices.
Chart of SPDR Gold Trust (NYSEArca:GLD) gold bullion backing vs. spot bullion price. Source: BullionVault via ExchangeTradedGold.com
 
US consumer spending “is supported by very constructive household fundamentals,” reckons Canadian bank RBC’s chief US economist Tom Porcelli.
 
Revisions to end-2016 data today also said US households saved the smallest proportion of income since the eve of the global financial crisis 9 years earlier in October-December.
 
“I think the market is much more worried about the inflation story [after] buying the Fed’s initial narrative that it was transitory,” said Canadian bank BMO’s US rate strategist Ian Lyngen this week after the US central bank kept rates and QE bond holdings unchanged.
 
Energy and other commodity prices rose Friday in terms of the weaker US Dollar, but global stock markets fell, extending yesterday’s drop in New York’s tech-heavy Nasdaq index after giant internet retailer Amazon – now accounting for more than two-fifths of all online sales in the US – reported a 77% drop in net income for the April-June quarter, thanks to heavy spending on new categories, countries and video content.
 
“Gold opened in Asia near the previous session’s high,” says a note from Swiss refining and finance group MKS Pamp’s trading team, “and traded up to 6-week high $1264.”
 
With Chinese gold prices hitting 1-month highs in Yuan terms, that saw Shanghai traders cut their premium above London quotes to $7 per ounce, MKS says, “and we saw the metal range-bound through the remainder of the day.”
 
Indian gold discounts below London quotes meantime widened to the largest in 7 months, Reuters reports, with bullion dealers saying the No.2 consumer country’s typically “weak” summer demand has been worsened by the price rise.
 
“In the local market, prices have [already] risen due to the GST [Goods and Services Tax] and… consumers are not comfortable with the price rise,” the newswire quotes Mukesh Kothari at Mumbai dealer RiddiSiddhi Bullions.
 
Trading 0.8% higher from last weekend in Dollar terms as New York trade opened Friday morning, gold held dead flat versus the Euro at €1076 per ounce.
 
The live gold price in Pounds per ounce stood £2 lighter from last Friday at £964.
 
From 9-year highs hit immediately after Donald Trump’s US presidential election, the Dollar has now lost 3% against the Yuan so far in 2017, and dropped 11% against the single currency Euro.

Gold Price Jumps Only in Dollars as 'Low-Rate Yellen' Gets Trump's Backing

July 27, 2017
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GOLD PRICE gains continued for Dollar investors on Thursday but held flat for other traders as the US currency touched its lowest Euro value since January 2015 following yesterday’s “no change” decision from the Federal Reserve.
 
“The actual path of the federal funds rate will depend on the economic outlook as informed by incoming data,” said the Fed’s July statement, seemingly delaying a move to start reducing its $4.6 trillion holdings of QE-bought Treasury and mortgage-backed bonds.
 
Asian stock markets rose – as did most commodities and major government bond prices – but European equities then slipped as the Dollar bounced from its new 30-month lows versus the 19-nation single currency.
 
Gold priced in Dollars today set its highest London benchmarking since 14 June at $1262 per ounce.
 
But priced in Euros, gold fixed at only a 3-session high. The UK gold price in Pounds per ounce reached only a 2-session high.
 
Thursday morning’s Dollar price stood 2.0% above the 2017 average to date.
 
For Euro and Sterling investors it came 5.1% and 1.9% below respectively.
 
“The Dollar’s biggest problem is it can’t expect help from the Fed for a long time,” Reuters quotes FX head Alan Ruskin at German investment and commercial bank Deutsche.
 
“[So] we are still in a risk-favorable loop, whereby subdued goods and services inflation supports a well-behaved bond market and asset inflation.
 
“It’s just another day in paradise.”
 
“Nothing in [Wednesday’s] statement changes Pimco’s view that a third rate hike this year is far from a done deal,” the Financial Times meantime quotes global strategist Richard Clarida at the California-based bond fund giant.
 
“If there is no rebound in core inflation between now and December, the next rate hike may be a decision for the next Fed chair, if Janet Yellen is not reappointed.”
 
Yellen’s current term as head of the US central bank ends in February 2018.
 
“I like her; I like her demeanor. I think she’s done a good job,” US President Donald Trump told the Wall Street Journal yesterday.
 
“I have a lot of respect for her,” the real estate mogul and reality TV star added.
 
“She is a low-interest-rate person.”
 
Chart of gold priced in Dollars (blue) and also adjusted by trade-weighted Dollar index (major currencies, red, rebased to 1 Sept 2011). Source: St.Louis Fed
 
Despite the Dollar’s 2017 drop on the forex market, the gold price for US savers and investors remains further below its all-time peak of 6 years ago than it does against other currencies. 
 
Priced in the Dollar, gold today traded 30% below its level of September 2011.
 
Adjusted for the Dollar’s trade-weighted index against major currencies, the metal’s spot bullion price has lost just 12% for non-US consumers, miners and investors.
 
Overnight action in Asia and then London saw spot gold prices rise sharply versus the Japanese Yen and Swiss Franc, hitting new July highs as those two ‘safe haven’ currencies retreated with the Dollar on the FX market.
 
With US GDP data for April to June due Friday, “we might [find out] whether there’s a reason Janet Yellen is acting concerned,” says financial writer John Crudele in the New York Post.
 
“Rate hikes are already coming at a glacial speed. Why is Yellen slowing them down even more?”

Spot Gold 'Due a Boost' as Dollar Bounces, Stocks Set New Highs Ahead of 'No Change' Fed

July 26, 2017
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SPOT GOLD held at 3-session lows Wednesday lunchtime in London, trading at $1247 per ounce as world stock markets edged up to new all-time highs ahead of today’s US Federal Reserve decision, widely expected to leave rates and QE bond holdings unchanged.
 
Major government bond prices ticked higher, nudging the yield offered by 10-year US Treasurys down one notch from yesterday’s 10-session highs of 2.33%.
 
The US Dollar rallied over 1 cent versus the Euro from yesterday’s touch of 30-month lows at $1.17 to the single currency.
 
Primarily used in autocatalysts to clean emissions from gasoline engines, palladium meantime held firm around $860 per ounce despite news that the UK government wants to join France in banning the sale of new petrol and diesel cars and other light-duty vehicles from 2040.
 
The price of platinum – needed in diesel catalysts but finding a greater proportion of annual demand from non-auto uses – gave back the last of last week’s 1.4% gain, retreating to $921 per ounce.
 
“Precious metals,” says a weekly commodities note from Canadian brokerage TD Securities, “[have] received a boost from low global real interest rates, a slumping USD, growing ambiguity surrounding Fed interest hikes, and ECB go slow normalization policy mantra [on Eurozone rates and QE].
 
Raising its key interest rate by 0.5% since February, the US Fed has in fact seen real interest rates – after accounting for the Consumer Price Index – rise 1.4 percentage points as that official measure of inflation has slowed.
 
Chart of the Fed Funds rates, adjusted for CPI inflation, versus gold priced in Dollars. Source: St.Louis Fed
 
“Spec positioning suggests silver has plenty of room to rally,” TD adds, after latest data showed hedge funds and other money managers placing record bets against silver prices on the Comex futures and options exchange last week.
 
Silver tracked the spot gold price‘s retreat and slight rally ahead of the Fed on Wednesday, also holding 0.7% lower for the week so far at $16.41 per ounce.
 
“[Despite] equity prices looking increasingly expensive, particularly when compared against gold,” says the latest weekly note from specialist analysts Metals Focus, “institutional investment in gold has so far remained light in absolute terms and even more so when it comes to its share of overall investable assets.
 
“[But] we are sceptical that fiscal accommodation in the US will see the country’s growth accelerate materially [while] monetary policies are likely to remain highly accommodative [and] macroeconomic and geopolitical risks will persist.
 
Altogether, this “should offer gold a boost later this year,” says Metals Focus, but for now “we expect gold prices to remain in a period of consolidation.”
 
“Spot Gold is roughly in the middle of the range which has dominated over the past 4 months,” says the latest technical analysis from Karen Jones at German financial services group Commerzbank, pointing to the March low of $1195 and June’s 7-month peak $100 higher.
 
“Very near term we would allow for some slippage to the 200 day [moving average] at $1229,” says Jones.
 
“Our longer term [bullish] bias will only be confirmed on a break and weekly close above [the June high at] $1295.79…”
 
Between here and there however, spot gold prices are “likely to test again soon” the downtrend joining the peaks since the metal’s all-time high of September 2011 at $1920, says the latest analysis from Jonathan Butler at Japanese conglomerate Mitsubishi.
 
“This level, [now] at $1253…is especially significant,” Butler says, “as it coincides with the first Fibonacci retracement of the 2011 high to 2015 low” – meaning a 23.6% recovery of spot gold’s peak to low, in line with a mathematical series widely followed by technical analysts

Gold Bullion Leaves GLD Again But 'Likely to Test' 2011 Downtrend as Dollar Falls

July 25, 2017
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GOLD BULLION fell against all major currencies bar the US Dollar in London on Tuesday, losing 1% from yesterday’s 3-week high in Euro terms as Western stock markets rose with major government bond yields.
 
Ten-year US Treasury yields touched 1-week highs at 2.29% as bond prices fell ahead of tomorrow’s US Federal Reserve decision on monetary policy – widely expected to leave rates and QE holdings unchanged.
 
Despite yesterday’s rise to 1-month US Dollar highs in the gold price, Monday’s close saw another outflow of gold from the bullion backing the SPDR Gold Trust (NYSEArca:GLD), as shareholders again liquidated stock from the largest exchange-traded vehicle for tracking the metal.
 
The world’s largest ETF of any kind at its peak 2011 value, the GLD has not had a day of bullion inflows in almost 1 month, shrinking by 6.6% since 26 June as gold prices first lost and then regained 4.0% against the Dollar to trade back at $1255 per ounce on Monday.
 
Technical analysis says “Gold [is] looking to break out of downtrend since 2011 nominal high,” writes Mitsubishi’s strategist Jonathan Butler in his latest quarterly report for clients of the Japanese conglomerate.
 
“Gold has already tested the red downtrend line that has prevailed since the 2011 nominal high and is likely to test it again soon.”
Chart of gold's 2011-2017 downtrend. Source: Mitsubishi from Bloomberg
Looking at investment demand, “Rising US real [bond] yields may temper gold’s upside in Q3,” says Butler, but “the Dollar will remain on the back foot if US political deadlock continues…which will help support USD denominated gold.
 
“Elevated risks of an equity pullback could help gold as a haven,” Butler goes on, but from the key Asian consumer markets “physical demand for gold has been mixed so far this year.”
 
China’s first-half gold consumption data are due shortly from the government-mandated China Gold Association.
 
Legal gold imports to No.2 consumer India “more than doubled” by value in the April-to-June quarter from a year earlier, LiveMint reports, reaching $11.3bn.
 
Former No.4 consumer nation Turkey – pushed into 5th place by Germany behind the US since 2015 – meantime saw its trade deficit yawn 43% wider in May from 12 months earlier, “mainly due to a strong 237% y/y growth rate in imports of gold and other precious metals to $2.23bn,” says Intellinews, summarizing TUIK figures.
 
“The second half is likely to be stronger in India during the post-monsoon wedding season,” says Butler at Mitsubishi, now expecting gold to average $1250 per ounce in 2017 and $1300 in 2018.
 
Year-to-date, gold has averaged $1236 per ounce, rising from a New Year low of $1151 to a June peak at $1293.50 on the daily LBMA Gold Price benchmark.
 
The London Metal Exchange (LME) today told Reuters that it will challenge the LBMA benchmark’s global dominance by publishing gold and silver reference prices – also taken at 10.30am and 3pm in London for gold, and 12 noon for silver – based on trading of its new futures contracts.
 
The move “follow[s] a number of requests from key precious metals market participants,” the LME claims.
 
The LME’s spot gold contracts have gained 3.3% in Dollar terms since launching a fortnight ago yesterday, rising on 7 of those 10 trading days.
 
Data show the 12-month contract on LMEprecious rising from a contango above spot of $18.00 per ounce to $18.80 over that time.
 
Comex gold contracts – the world’s most heavily traded futures referencing gold bullion – have in contrast gone from a $21 one-year contango to $20.20 over that time.

Gold Price Hits 4-Week High vs Dollar as Spicer Quits, IMF Cuts US Growth, Fed Looms

July 25, 2017
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GOLD PRICES rose to a 4-week high against a weak Dollar on Monday morning in London, gaining as the US currency held near a 13-month low as traders looked from the resignation of President Trump’s key PR aide to this week’s Fed meeting on interest rates, writes Steffen Grosshauser at BullionVault.
 
Silver surged to its highest level in 3 weeks, hitting $16.54 per ounce but outshone by platinum, which extended its rally from early July’s new 2017 lows to 4.8% at $934.
 
Ahead of the Federal Reserve’s 25-26 July meeting – expected to leave rates and QE bond holdings unchanged – the Euro held onto last week’s gains near 2-year highs against the Dollar after the IMF downgraded the outlook for US economic growth but raised its forecast for the 19-nation single currency zone.
 
The Dollar’s fresh drop capped gold-price and other precious metal gain around last week’s closing level for non-US investors.
 
“Traders haven’t been this bearish on the US Dollar for more than a year,” says Reuters of positioning data in Comex derivatives.
 
With Sean Spicer quitting as White House press secretary at the weekend, “I think people are getting more nervous and careful about what is going to happen [with Trump’s administration],” explained ICBC Standard Bank’s Tokyo head of commodity trading, Yuichi Ikemizu.
 
Gold prices today hit $1257 per ounce, the highest since 25 June, and broke through the 100- and 50-day moving averages after making the biggest weekly gains in two months.
 
Gold could “remain in a $1200-$1250 range” if the US central bank decides to raise interest rates this week, reckons Dutch bank ABN Amro’s analyst Georgette Boele.
 
Current betting on interest-rate futures sees only a 3% chance of the Fed raising its key rate to a ceiling of 1.50% in Wednesday’s announcement.
 
Betting on September’s decision – which will bring new economic forecasts plus a press conference with Fed chair Janet Yellen – has seen “no change” from the current 1.25% ceiling rise from odds of 87% to almost 92% certainty.
 
Chart of current betting on the US Fed's September 2017 meeting decision. Source: CME Group
 
Monday meantime saw the Washington-based International Monetary Fund (IMF) maintain its positive growth forecasts for the world economy, but downgrade its prognosis for the US and the UK.
 
“We have long predicted that Brexit would have some negative long-term effects,” said IMF’s chief economist, Maurice Obstfeld. “But in the case of this year’s forecast [downgrade] we are basing it purely on the observation of data for the first part of this year which has been weaker than expected.”
 
Global gross domestic product would grow by 3.5% and 3.6% in 2017 and 2018 respectively, according to the IMF’s latest quarterly update to its World Economic Outlook. 
 
A separate poll of economists meantime sees a one-in-three risk that Britain and the European Union will fail to close a deal over the UK’s exit from the world’s single largest economic region by the end of the 2-year countdown at the end of March 2019, according to a Reuters poll.
 
Money managers and hedge funds raised their bullish gold betting via Comex derivatives for the first time in 6 weeks on latest data from US regulator the Commodity Futures Trading Commission (CFTC).
 
In contrast, the Managed Money’s total number of bearish bets against silver hit a fresh record, keeping the net position short overall for the second week since August 2015.
Chart of Managed Money directional bets on Comex silver futures and options. Source: BullionVault via CFTC, LBMA
 
Holdings in the giant SPDR Gold Trust (NYSEArca:GLD) were reduced by further 23 tonnes and shrank to 813 tonnes last week – the lowest since beginning of February. The world’s biggest gold-backed exchange-traded fund has seen 4.3% outflows so far this month. 
 
In other commodities, crude oil moved up slightly from 1-week lows on Monday as Opec oil cartel members met with non-member producer states in St.Petersburg, Russia to review setting new output cut targets worldwide. 

Gold Bullion 'Appeals as Insurance' as ECB Avoids the 'T' Word, US 'Risks Outright Deflation'

July 21, 2017
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GOLD BULLION headed for a second weekly gain versus the falling Dollar Friday morning in London, trading at $1247 per ounce as the US currency held at its weakest in 14 months against the Euro.
 
Asian stock markets closed the day lower for a small weekly gain, while European shares held flat to trade 1% below last Friday’s finish.
 
Commodity indices held 1.3% higher from last weekend, with silver up 2.7% – almost twice gold’s week-on-week rise against the Dollar – at $16.42 per ounce.
 
Priced in the Euro, gold bullion was unchanged Friday AM from the same time last week at €1071 per ounce price, holding flat following yesterday’s “no change” decision on negative rates and €60 billion per month of QE bond buying from the European Central Bank.
 
Eurozone central-bank chief Mario Draghi “wants to avoid the ‘T’ word – tapering – if [he] can,” says FX strategist Steven Barrow at Chinese-owned bullion and investment bank ICBC Standard.
 
“[But] the ECB obviously has the intention to reduce these [QE bond] purchases to zero in time.”
 
Major government bond prices edged higher again Friday however, pushing the yield offered by 10-year US Treasury debt down towards 4-week lows at 2.24%.
 
Gold bullion’s 4-month low versus the Dollar of early July coincided with 10-year T-bond yields hitting their highest level since March at 2.40%.
 
Adjusted for market-based inflation expectations, 10-year US yields have risen sharply since last July’s 3-year low, just below zero.
 
Gold priced in Dollars has retreated almost 10% from its 2-year high hit that same day.
 
Chart of Dollar gold price vs. real 10-year US Treasury yields (breakeven rate). Source: St.Louis Fed
 
“If inflationary pressures are indeed ebbing in the US economy,” says this week’s Global Strategy note from Albert Edwards at French investment and bullion market-making bank Societe Generale, “this begs the question…
 
“If the third-longest [economic growth] cycle in US history cannot produce a cyclical uplift in wages and prices, what on earth will happen in the next recession?
 
“Investors might give some thought to the fact that we are now just one recession away from Japanese-style outright deflation!”
 
“Any large disappointment in the [global economic] growth story will lead to an increase in gold prices,” said Dominic Schnider at Swiss bank and London bullion market maker UBS’s Wealth Management division in Hong Kong today.
 
“The appeal of gold as an insurance asset is greater today than it was at the beginning of the year.”
 
“That gold is holding around these levels we find encouraging,” says his UBS colleague in London, precious metals analyst Joni Teves.
 
“It suggests to us that gold continues to be viewed as a [portfolio] diversifier and this should help keep the market supported overall.”
 
This week’s liquidation of giant exchange-traded gold vehicle the SPDR Gold Trust (NYSEArca:GLD) ended on Thursday, keeping the ETF’s gold backing unchanged at 5-month lows of 816 tonnes.
 
Gold prices in Shanghai rose versus the Yuan on Friday, but Chinese premiums over global quotes fell, dropping towards $7.50 per ounce above London – the smallest incentive to new imports into the world’s No.1 consumer nation since early June’s 7-month peak in Dollar prices.
 
“Momentum indicators are bullish,” says the latest daily technical analysis from London bullion clearing bank Scotia Mocatta’s New York office, “and [is] biased to the upside as long as gold closes above the 200-day [Moving Average]” now at $1230 per ounce.

Dollar Gold Price Snaps 7-Day Gains as Japan + Euro Stick with Negative Rates, Record QE

July 21, 2017
Latest News
GOLD PRICE gains over the previous 7 sessions ended in Asian and London trade Thursday, with the metal retreating almost $10 per ounce from this week’s new July highs as the US Dollar rallied following “no change” decisions on sub-zero rates and record QE bond buying from both Japan and the 19-nation Euro currency zone – the world’s 4th and 2nd largest economies respectively.
 
Three of the Bank of Japan’s 10 voting members dissented for the fifth meeting so far in 2017, saying that negative rates on commercial bank deposits risk “adverse effects” and calling unlimited quantitative easing – which now target a 0% yield on 10-year Japanese government bonds – “excessive”.
 
The Yen retreated from 3-week highs versus the Dollar while 10-year JGB prices slipped on today’s news, edging yields higher towards 0.08% per annum.
 
Tokyo’s Topix share index rose to new 2-year highs, but remained over 40% below its all-time peak of 1989.
 
“Incoming information confirms a continued strengthening of economic expansion in the Euro area,” European Central Bank president Mario Draghi then said at lunchtime in Frankfurt, adding that “conditions remain broadly supportive” for higher consumer-price inflation despite the Euro’s recent strength on the FX market.
 
“A very substantial degree of monetary accommodation is still needed [however] for underlying inflation pressures to build up,” Draghi said, rowing back from his last policy-meeting press conference when he suggested that QE bond buying could be “tapered” sooner than the current December deadline.
 
The Euro fell and then jumped on Draghi’s comments, whipping the gold price for Eurozone investors before holding the metal 1.6% above early July’s near 18-month lows beneath €1057.
 
Chart of the spot gold bullion price in Euros. Source: BullionVault
 
Shares in the EuroStoxx 50 index rose, extending their month-to-date gains to 2.6% but still more than one-fifth below the pre-financial crisis peak of summer 2007 and one-third below the record “dotcom” high of New Year 2000.
 
Government bond yields for Italy and Spain – both seeing fresh rescues of commercial lenders in 2017 – meantime eased lower, retreating further from early 2017’s multi-year highs, while German 10-year Bund yields edged higher but stayed below last week’s 18-month highs of 0.60%.
 
Consumer-price inflation across the 19-nation Euro currency zone last month slowed to its weakest annual pace so far in 2017, receding to 1.3% per year.
 
Already doubling between 1999 and the eve of the financial crisis in 2007, the ECB’s balancesheet has since grown a further 140% to reach more than €3.6 trillion.
 
More than half of its assets are Euro-denominated financial securities, while the next largest item – lending to Euro area credit institutions – accounts for 16%.
 
Unchanged by weight, the Eurosystem’s central-bank gold holdings were the third largest item at end-2016, rising 90% in value over the last 10 years to €382 billion.
 
“In terms of investment demand, the physically backed [ETF] products have seen outflows recently rather than inflows,” Reuters quotes Swiss private bank Julius Baer’s analyst Carsten Menke. 
 
“So there hasn’t been much support from that side.”
 
The world largest gold-backed exchange-traded fund, the SPDR Gold Trust (NYSEArca:GLD) yesterday saw another outflow of metal as shareholders liquidated the stock.
 
Cutting the GLD’s holdings to new 5-month lows at 816 tonnes, that extended the trust fund’s redemptions over the last 5 trading sessions to 16.3 tonnes – a new 5-session record GLD outflow for a week of rising gold prices.

Gold Bar Outflows from GLD Heaviest-Ever for a Week of Rising Prices

July 19, 2017
Latest News
GOLD BARS traded in London wholesale market rose for a fourth morning running on Wednesday, holding near 2-week highs against a rallying US Dollar as world stock markets steadied and bond prices also flat-lined, holding longer-term interest rates at 3-week lows.
 
Trading above $1240 per ounce, the price of large gold bars also gained for non-Dollar investors as the Euro retreated from Tuesday’s new 14-month highs on the FX market ahead of Thursday’s European Central Bank decision on rates and QE bond buying.
 
The Bank of Japan decides Yen rates and QE tomorrow as well, and is also expected to keep policy unchanged.
 
“Gold has embarked on a rebound,” says a technical analysis from bullion market-making bank Societe Generale, “and has now come up against an up-sloping trend at $1239/1242.
 
“If this gives way, there will be a risk of further recovery towards late June highs of $1255/1260.”
 
Fundamentally meantime, “We forecast mine supply declining,” says a note from Swiss bank Credit Suisse, “[with] geopolitical uncertainty and wealth preservation stoking bar hoarding.”
 
Over the last week however, investor interest in the largest exchange-traded gold vehicle – the SPDR Gold Trust (NYSEArca:GLD) launched in late 2004 – has shrunk by 0.9% despite Dollar gold prices rising 2.5% over that same period.
 
That liquidation has forced the outflow of 10.9 tonnes from the gold backing the GLD – its heaviest-ever redemption across a week of rising gold prices – taking the total down to 5-month lows at 821 tonnes.
 
The largest silver ETF – the iShares Silver Trust (NYSEArca:SLV) – has also shrunk over the last week, but only by 0.2% and also from its largest size since last November, reached as prices touched their lowest levels since spring 2016 last Monday.
 
Chart of GLD gold backing vs spot gold price. Source: BullionVault via ExchangeTradedGold.com
 
Shanghai gold prices today held at 2-week highs against a rising Chinese Yuan, keeping the premium to London quotes above $9 per ounce for bullion delivered in the world’s No.1 mining, importing and consuming nation.
 
No.2 consumer India may “have its own good delivery norms” on a proposed bullion exchange reports the Business Standard, quoting comments from trade association IBJA secretary Surendra Mehta on the need for “Indian rules” which may diverge from the globally-accepted London Bullion Market Association rules and approved-refiner list for large wholesale-market gold bars.
 
With India’s refining industry however struggling to source material after a wave of over-investment, “There can be no compromise on precision and quality” says Rajesh Khosla, managing director of India’s only LBMA-accredited fabricator, the government-backed MMTC-Pamp.
 
China today has 9 gold refineries on the LBMA’s current list for manufacturing Good Delivery gold bars, second only to Japan.
 
Gold bullion exports today remain banned by both China and India.

Gold Prices Rise 3rd Day as US Debt Ceiling 'Blocks Fed Rate Hikes', Dollar Falls

July 18, 2017
Latest News
GOLD PRICES rose sharply for the third session running in London on Tuesday, gaining as world stock markets fell, commodities rose, and interest rates on major government bonds retreated to new lows for July.
 
Silver stalled at $16.14, unchanged from Monday’s jump, while platinum gave back $10 per ounce from yesterday’s spike to 1-month highs at $934.50 per ounce.
 
Peaking above $1238, gold priced in US Dollars recovered almost the last of this month’s earlier 3% loss, driven by “technical follow-up buying” after breaking above the “important” 200-day moving average according to a commodities note from German bank Commerzbank.
 
“The weak US Dollar is also playing its part – it has depreciated to a 14-month low against the Euro.”
 
Looking at US interest rates, “[Last week’s] unexpectedly dovish tone from Fed Chair [Janet Yellen] and weaker than expected CPI [inflation] data raised questions on the Fed’s ability to stay its course,” says a note from Canadian brokerage T.D.Securities.
 
The market’s previously “hawkish interpretation of the June [Fed] meeting statement and resultant slide in gold close to $1200 appeared a little incongruous to us,” agrees precious metals strategist Tom Kendall at Chinese-owned investment and bullion clearing bank ICBC Standard.
 
“In addition, the debt ceiling will start to dominate headlines as we move through the northern hemisphere summer,” he adds, predicting that the 2017 discussions “will not be as disruptive as 2011” – when Congress’ delay saw ratings agency S&P downgrade US debt and gold hit all-time record highs – but will prove more fractious than either 2013 or 2016.
 
Chart of US federal debt-to-GDP ratio (left) vs. gold priced in Dollars (right), both year-over-year change. Source: St.Louis Fed
 
Staff from US Treasury Secretary Steve Mnuchin’s office rang major bond dealers on Friday, Bloomberg reports, to deny “secret plans” to repay debt ahead of paying state-sector salaries if Congress and the Senate fail to agree a higher debt ceiling when the current limit is reached in October.
 
Having said a debt-ceiling crisis looked “unlikely” only this March, ratings-agency Fitch now says the plan would force it to review Washington’s triple-A status.
 
President Trump’s plan to repeal and replace ex-president Obama’s Affordable Care Act failed to pass the Senate yesterday after two Republican politicians withdrew their support, saying the new proposal “doesn’t go far enough” and costing the party its majority in the lawmaker chamber.
 
“In our view,” says Kendall at ICBC Standard Bank, “the Fed is unlikely to be able to increase rates again soon, possibly not again this year, and it will certainly not rush to reduce its balance sheet.”
 
Betting on next week’s Fed rate decision currently sees 97% odds of “no change” at the current ceiling of 1.25%, according to data compiled by futures exchange the CME.
 
Betting on a rate rise at the following meeting in September has meantime retreated  by one-third from this time last week, with the likelihood of “no change” rising near 92%.
 
With the Dollar falling once again Tuesday on the FX market, gold priced in other currencies failed to rise as sharply as for US investors.
 
Euro gold prices reversed all of Monday’s 0.6% gain, while the Yen price halved its 0.7% jump.
 
The UK gold price in Pounds per ounce pushed higher, however, nearing 2-week highs above £950 after new consumer-price data showed inflation retreating last month to 2.6% per year – down from May’s pace of 2.9% and well below analyst forecasts for a new 3-year record – denting expectations that the Bank of England will end it record-low interest rate policy.
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