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Author Archives: City Gold Bullion

Gold Bars Flow Out of ETFs But 'Room for Risk Hedging' Before Fed, Debt Ceiling

March 7, 2017
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GOLD BARS dealt in London’s wholesale market fell to new 3-week lows against a rising US Dollar on Tuesday, extended the drop on ETF investor selling as traders continued to bet on the Federal Reserve raising its key interest rate at next week’s March meeting.
 
So far in March the giant SPDR Gold Trust (NYSEArca:GLD) has now shrunk by 8.5 tonnes – equal to 1 day’s global gold mine output – as investor selling cuts the number of gold bars needed to back the ETF to a 1-month low beneath 837 tonnes.
 
Chart of the SPDR Gold Trust holdings of gold bullion
 
Silver prices also slipped Tuesday to new 3-week lows after the iShares Silver ETF (NYSEArca:SLV) shrank to its smallest size since last June, decreasing by some 9% since Donald Trump’s victory in the US presidential election of November.
 
After last week’s concerted ‘wake up’ call from a raft of Fed officials giving public speeches, betting on US interest-rate futures now sees a hike at next week’s meeting as 85% certain.
 
The balance of traders predict another hike in June or July, according to futures exchange the CME’s data, with another to follow in December or January.
 
That would still only take the Fed Funds rate to a ceiling of 1.5% however.
 
Last week’s US data put inflation in January at 1.9%, the closest it’s come to the Fed’s 2.0% target since 2012.
 
“Markets appear remarkably calm,” says analyst Jonathan Butler at Japanese conglomerate Mitsubishi, warning how “one factor that does not appear to be having much impact right now is the US debt ceiling.
 
“Congress needs to raise or suspend [it] before 15th March” – the day of the Fed’s mid-March decision on Dollar rates.
 
With Wall Street’s VIX volatility ‘fear gauge’ near 3-year lows, “Safe haven bids appear to have been largely priced out of gold,” Butler says.
 
“We believe there is room to re-build risk hedging in gold in anticipation of extreme, albeit low probability, market turmoil” should Trump and Congress fail to agree a new ceiling above the current $20 trillion.
 
Wholesale gold bar prices fell Tuesday morning to $1223 per ounce – a “support” level according to technical analyst Wang Tao at Reuters, with “the next support at $1213.”
 
“Support is at $1219,” counters bullion clearer and gold-bar market maker Scotia Mocatta’s New York team, pointing to the 38.2% retracement – a key Fibonacci level applied by some technical analysts – of the “Jan low-Feb high range.” 
 
Gold bars traded in China – where the People’s Bank today said it kept its bullion reserves unchanged for a 4th month running in February – extended their premium over London quotes to $15 per ounce on Tuesday.
 
The British Pound meantime fell to its lowest Dollar value in almost 2 months ahead of the UK’s unelected House of Lords voting on the ‘Article 50’ Bill, needed to fire the starting gun on 2 years of Brexit negotiations with Europe.
 
That buoyed the price of large gold bars in Sterling terms to £1004 per ounce – unchanged for the week so far.

Gold Prices Above 3-Week Low on North Korea Missile Test, 85% Fed Rate-Rise Odds

March 7, 2017
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GOLD PRICES were little changed on Monday morning in London, holding onto last week’s 2.1% drop as the US Dollar rallied and geopolitical tensions rose over North Korea’s latest missile test, writes Steffen Grosshauser at BullionVault.
 
Asian stock markets were mixed, closing the day flat overall, after North Korea fired four ballistic missiles into the Sea of Japan in what Japanese prime minister Shinzo Abe called a “new stage of threat” from the poverty-stricken, closed-economy dictatorship.
 
Shanghai gold prices extended their premium over London quotes to $14 per ounce – well over 5 times the typical incentive to new imports – on solid trading volumes.
 
European trade saw Germany’s Dax share index near its record high of April 2015 – jumping some 33% over the last 12 months – but Frankfurt then dropped as Deutsche Bank shares tumbled following the bank’s announcement of an overhaul including a new share issue of around $8.5 billion.
 
Wider Eurozone equities slipped 0.3% on average by the start of New York trading in the US, where the latest monthly jobs data will be reported on Friday and the Federal Reserve will then vote on Dollar interest rates next week.
 
Traders now see the likelihood of a rate increase this month at 85%, up from a chance of just one in three early last week, as shown by the CME Group’s Fed Watch tool.
 
Chart of betting on US Fed rates from CME
 
“There is still plenty of critical uncertainty supporting safe-haven buying and the news out of North Korea certainly has seen that side of the market quite active again,” says Australia and New Zealand Bank Group (ANZ) commodity strategist Daniel Hynes.
 
“We are fairly neutral on the outlook for gold this week. Unless we see any unexpected commentary around that this week, [an interest rate hike] is pretty much built into the price now.”
 
Gold prices edged $3 lower to $1231 per ounce on Monday morning, but held above Friday’s new 3-week low of $1222, while the US Dollar slightly recovered from its own two-session losses at the end of last week.
 
“North Korea is unpredictable, but it fairly frequently conducts missile tests,” said Kaneo Ogino, director at foreign exchange research firm Global-Info Co in Tokyo.
 
“One difference now is that it is also hard to predict how President Trump will respond to such tests.”
 
Over in India – the world’s No.2 gold consumer nation behind China – bullion imports jumped by more than 80% year-on-year in February, according to precious-metals specialists Thomson Reuters GFMS, as household demand returns for spring’s key Hindu wedding season.

Gold Price 'Falls Out of 2017 Uptrend' Amid Bond Sell-Off as Yellen Joins Fed Rate-Rise Warning

March 4, 2017
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GOLD PRICES dipped to $1225 per ounce in London Friday morning, rallying $5 by lunchtime but heading for the metal’s first weekly loss in 5 as bond prices also fell further ahead of US Federal Reserve chair Janet Yellen giving a speech on the outlook for Dollar interest rates.
 
Falling to $17.64 per ounce, silver also reached new 3-week lows, extending Thursday afternoon’s slump when it lost two-thirds of a Dollar inside 2 hours amid the drop in bond prices, which drove longer-term interest rates higher.
 
Before Yellen’s speech – one of 5 due Friday, capping a week of Fed speeches telling the markets to expect a rate hike at the mid-March meeting, including from leading ‘dove’ Lael Brainard – data were due from the key ISM survey of corporate purchasing managers.
 
Business activity across the 19-nation Eurozone expanded the fastest since spring 2011 in February according to this morning’s Markit PMI surveys, but retail sales for January and Italy’s GDP for end-2016 both came in below analysts’ forecasts.
 
“Yet again the bond sell-off has dragged gold away from the steep up channel in place since last December,” says a note from the technical analysis team at French investment bank and London bullion market-maker Societe Generale.
 
Peaking at the top of the upwards channel running since mid-January, gold’s rally also “petered out at the 200-day Moving Average at $1264,” says SocGen, now “breaching [the bottom of] the up channel at $1230/1236.”
 
Chart of Dollar gold prices vs 10-year US Treasury bond yields
 
 
US Treasury bond prices fell again on Friday, driving the yield offered to new buyers of Washington’s 10-year debt up to a 3-week high of 2.49%.
 
Ten-year yields hit a record low of 1.37% last July, immediately after the UK’s shock Brexit referendum result.
 
As 10-year yields then surged to 2.60% by mid-December’s interest rate hike from the Federal Reserve, gold prices retreated 19% from their 2-year high of $1375 per ounce.
 
“A definite close below $1236 will ensure further leg of down move towards $1220/1200,” reckons the SocGen team.
 
Early buying in Asia on Friday “squeezed the market to the day’s high of $1236 in the early hours,” says a note from Swiss refining and finance group MKS.
 
“[But] the rally proved short-lived as gold was sold down to test the previous nights low.
 
“Market focus [now] will be on Fed Chair Yellen’s economic outlook speech in Chicago.”
 
Crypto-currency Bitcoin – which fell by 75% within 1 year of its 2013 peak – meantime rose to new all-time highs at $1293 having overtaken the price for 1 ounce of gold for the first time on Thursday.
 
That took the total value of all BTC created since Bitcoin’s invention in 2009 to $20.9bn according to CoinDesk.
 
London bullion’s 5 clearing members transferred that much value between them in gold every day on average in January according to data from trade association the LBMA.
 
Investors put almost half as much – some $9.8bn – into stockmarket mutual funds last week alone, according to the latest Bank of America-Merrill Lynch report.
 
US stock markets were set to record their 6th consecutive weekly rise as New York opened today, the longest run of gains since December 2014, despite slipping amid Thursday’s bond sell-off.
 
With Europe’s benchmark Brent crude oil rising back above $55 per barrel, broad commodity indices rallied Friday, but headed for their 3rd consecutive weekly drop on the Reuters/Jefferies CRB index.

Gold Price Below $1240 as US Bond Yields Hit Near-8 Year High, Silver Firmer

March 3, 2017
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GOLD PRICES fell with the Euro currency to new 1-week lows against the Dollar in London trade on Thursday, dropping back to $1240 for the second day running as government bond prices fell yet again, pushing 2-year US Treasury yields up to the highest level in more than 7 years.
 
Commodities also dropped, and world stock markets retreated futher from last week’s new record highs, after new data said claims for US jobless benefits fall to the lowest level since 1973.
 
Betting on US interest rates now sees a 75% chance of the Federal Reserve raising its key rate at this month’s meeting according to data from the Comex exchange.
 
Two-year US Treasury yields rose to 1.32% according to Bloomberg data, the highest rate offered to new buyers since August 2009.
 
Chart of 2-year US Treasury bond yields vs. Dollar gold price. Source: St.Louis Fed
 
Consumer price inflation in the 19-nation Eurozone meantime rose to its fastest headline rate since January 2013 at 2.0% annual last month, data from Eurostat said.
 
Stripping out the 9.2% annual rise in energy costs however, so-called ‘core’ inflation held unchanged at 0.9%.
 
Turning “neutral” on the short-term outlook for gold prices, French investment bank Societe Generale’s Robin Bhar says that a “more hawkish Fed [is] offset by political uncertainties in the US and Europe.
 
“[Silver is] tracking gold movements closely, underpinned by copper strength.”
 
Silver today retreated only to $18.31 per ounce from last week’s finish at $18.37, holding firmer than gold prices as copper also slipped, down 0.9% for the day and dropping 2.5% from February’s new 21-month highs.
 
The number of shares in giant silver-backed trust fund the iShares SLV product held unchanged yet again yesterday.
 
But after 7 trading days of no change, Wednesday saw the creation of 800,000 shares in the giant SPDR Gold Trust (NYSEArca:GLD), the world’s largest ETF trust fund backed by gold.
 
That required an extra 2.4 tonnes of bullion to back the GLD’s value to shareholders, taking the total to 843.5 tonnes – some 15% below last July’s 3-year high.
 
Wholesale Chinese gold prices meantime held more than $11 per ounce above the global benchmark of quotes for London settlement, extending the strongest run of Lunar New Year Shanghai gold premiums since 2013.
 
The Ministry of Finance in India – the world’s no.2 consumer nation behind China – is looking to approve its own domestic spot bullion trading platform sometime in 2017, reports the Economic Times, with a working group convened under its Financial Stability and Development Council now including competitor exchanges the BSE, MCX and NCDEX.
 
London-based base metals exchange the LME today said that 4 more banks are interested in clearing its forthcoming LMEprecious futures contracts, due to be launched in 2017 in a joint venture with 4 market-making banks, gold vault owner and bullion clearer ICBC Standard Bank, a proprietary trading house, and the mining-backed World Gold Council.
 
Reuters yesterday said former LME chief Martin Abbott is working with competitor exchange ICE to launch a new base metals trading venue.
 
Bloomberg last night reported Abbott is working with trading-tech providers Autilla.

Gold Price Below $1240 After 5 Fed Chiefs Surprise with Rate-Hike Call for Ides of March

March 2, 2017
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GOLD PRICES fell near 1-week lows Wednesday in London, dipping beneath $1240 per ounce as US traders joined the session after Donald Trump’s first speech to Congress about his fiscal plans was overshadowed by 5 senior Federal Reserve officials surprising the markets with a seemingly co-ordinated announcement that Dollar interest rates are set to rise at this month’s central-bank meeting in 2 weeks’ time.
 
Annual US inflation on the PCE Price Index then came in at 1.9% for January on official data today, the fastest pace since October 2012.
 
Knocking the Euro down 1.5 cents from yesterday’s 2-week highs, the Dollar rose fastest against the Japanese Yen, hitting 3-week highs.
 
That pushed the gold price in Yen up towards new 12-month highs ¥4550 per gram, some 10% above last October’s retreat to 9-month lows, just before the election of Donald Trump as US president.
 
Betting on Comex Fed futures contracts jumped this morning to price a March hike as a 69% likelihood, up from 35% at Tuesday’s close according to the CME’s FedWatch tool.
 
Bloomberg data put the betting at 80% on according to a chart from Jonathan Butler at automaker and industrial conglomerate Mitsubishi.
Chart of betting on chance of a March 2017 rate rise from the US Fed. Source: Mitsubishi via Bloomberg
 
“We would be well-served taking the next step in the not-too-distant future,” said Dallas Fed chief Robert Kaplan to the Financial Times on Tuesday.
 
“I see three hikes as appropriate for 2017,” said Philadelphia Fed president Patrick Harker in a speech at Pennsylvania’s Temple University.
 
A March rate rise is “very much on the table for serious consideration,” said John Williams, president of the San Francisco Fed, speaking to business leaders in Santa Cruz.
 
“Putting the economic recovery in perspective, we’ve come a very long way.”
 
“Data we’ve seen over the last couple months,” agreed William Dudley, head of the New York Fed, in an interview with CNN, “is very much consistent with the economy continuing to grow at an above-trend pace.
 
Wednesday sees Fed governor and arch ‘dove’ Lael Brainard – one of chairwoman Janet Yellen’s top advisors – give a speech on the ‘Economic Outlook and Monetary Policy’.
 
“The Fed has essentially achieved its objectives concerning inflation and unemployment,” added non-voting ‘hawk’ James Bullard of the St.Louis Fed yesterday in a speech at George Washington University in Washington, DC.
 
“Now may be a good time,” Bullard concluded, “for the FOMC to begin to consider allowing the [$4.5 trillion] balance sheet to normalize by ending reinvestment” of its QE money creation program, started in 2008 to buy Treasury bonds and mortgage-backed securities in a bid to raise their price and so push longer-term interest rates down.
 
After US stock markets had closed Tuesday lower – falling for the first time in 13 sessions ahead of Trump’s conciliatory but low-on-detail speech to Congress – Asian and European equities rose sharply today, pulling the MSCI World Index up towards last week’s new record high.
 
Euro and Sterling gold prices held firmer than for Dollar investors, but bond prices followed Treasuries lower, pushing interest rates higher. 
 
“Core European [bond] yields are deep in negative territory,” notes bullion clearing bank ICBC Standard’s Tom Kendall, “and real yields [accounting for inflation] look even worse.
 
“So it would not be a surprise if European investors were increasing their allocations to gold.”
 
Also warning on the ‘Ides of March’ for 2017, Butler at Mitsubishi points to how the Fed’s looming rates decision of March 15 will coincide with the Dutch general election, currently seen with anti-Euro nationalist Geert wilders in the lead.
 
“If the populist right-wing Freedom party wins the biggest share of the vote,” says Butler, “this could create pressure for the Netherlands to leave the EU…support[ing] gold as a safe haven, just as the Brexit vote did.”
 
Tracking this morning’s latest data from Japan, both Eurozone and UK manufacturing surveys today missed analysts’ PMI forecasts for February, also retreating slightly from January.
 
China’s official NBS and also independent Caixin PMI survey from the Markit data agency both pointed higher.

China's Post-New Year Gold Bullion Premium Holds Over $10 as Trump Faces Congress

March 1, 2017
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GOLD BULLION slipped over $10 per ounce from yesterday’s spike to new 12-week highs in London on Tuesday, but held above $1250 per ounce ahead of new US president Donald Trump speaking to Congress on his fiscal plans.
 
World stock markets rose following Wall Street’s 12th consecutive new all-time closing high on the Dow Jones index.
 
US bond yields slipped once more, but with Trump’s expected tax cuts and new spending widely taken as bullish for the US economy, betting on a March rate-rise from the Federal Reserve has risen, putting the likelihood at 1-in-3 from lower than 1-in-4 before the weekend.
 
Silver bullion meantime traded 4.3% higher for the month of February, retreating 0.9% from Monday’s spike to $18.49 – also its highest price since Trump’s victory in November’s US presidential election.
 
Bullion prices in Shanghai had earlier fixed with a 4.8% monthly gain versus the Chinese Yuan, holding the premium for gold already landed in the world’s No.1 consumer nation above $10 per ounce yet again – more than 4 times the typical incentive to new imports.
 
Usually the Chinese New Year – celebrated in 2017 one month ago today – sees a lull in wholesale bullion demand, because the heavy jewelry, coin and small bar investments made during the Lunar New Year holidays needed metal shipping to retailers in advance.
 
One month into this Year of the Rooster however, the Shanghai Gold Price has now averaged a premium of almost $11 per ounce over and above London quotes.
Chart of Shanghai gold premiums, 1-month average after Chinese New Year, 2006-2017. Source: BullionVault
 
Barely 25% of the spike to 3-year highs in late-2016 on rumors of tighter import restrictions before the holiday shopping season, that still marks the largest New Year’s incentive to imports since 2013.
 
“Bullion imports into China ended last year strongly,” says a note from Japanese conglomerate Mitsubishi’s analyst Jonathan Butler, “due in part to a sustained local premium.
 
“But this did not spill over into demand this January…as many jewellery manufacturers and traders were already fully stocked ahead of the seasonally busy Lunar New Year period, which this year fell earlier than in 2016.”
 
New data overnight said Hong Kong shipments of gold bullion into mainland China fell 5% year-on-year in January, reaching less than 32 tonnes.
 
“The higher prices appear to have held buyers back,” says a note from the commodities and bullion analysts at German financial services giant Commerzbank today, also pointing to how a late Chinese New Year meant “many traders had already bought sufficient gold to cover their needs back in December.”
 
Trading activity from late 2016 and early 2017 so far suggests that, alongside China’s strong jewelry demand and retail investment, gold bullion is being sought by institutional and high-net-worth investors, thanks to what specialist analysts Metals Focus call a “relative lack of [other] investible assets” as people stay shy of the stock market and local government tries to curb real estate speculation.
 
While Hong Kong is no longer the only route into China for gold bullion, “not only was [February’s low import figure] somewhat less even than the weak month of last January,” Commerbank adds, “it was also the lowest level since August 2014.”
 
With the Indian Rupee recovering from last year’s record lows meantime, savers and investors in world No.2 gold consumer nation were today offered a ‘sweetener’ to invest in the government’s new issue of its ‘Sovereign Gold Bonds” after the last 4 showed a loss for their buyers.
 
Gold priced in US Dollars today headed for its 9th February gain of the last 11 years, holding a 3.3% gain for the month at lunchtime in London’s wholesale bullion market.

'Momentum Traders' Keep Gold Prices Near 3-Month High Ahead of Trump, Yellen Speeches

February 28, 2017
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GOLD PRICES remained close to 3-month highs on Monday morning in London as world stock markets slipped further from last week’s new all-time highs ahead of this week’s key speeches from US President Trump and Fed Chair Janet Yellen, writes Steffen Grosshauser at BullionVault.
 
Gold traded in a $6 range around last week’s close of $1257 per ounce, near the highest level since Trump’s presidential election victory last November.
 
The US Dollar retreated from Friday’s rally on stronger US housing data, dropping against the Euro but holding firm versus the the British Pound, which fell amid rumors that UK Prime Minister May is preparing for a second Scottish independence referendum as fall-out from the move to begin Brexit from the European Union.
 
Donald Trump speaks to the US Congress on Tuesday night, most likely focusing on economic policy – expected to spend on infrastructure and cut taxes to boost the US economy.
 
Federal Reserve vice-chair Stanley Fischer then speaks on ‘Monetary Policy Decision-Making’ at a forum in New York Thursday.
 
With 2 weeks until the Fed’s key March meeting, chair Yellen will address the ‘Economic Outlook’ in a speech in Chicago on Friday.
 
“The biggest driver of gold has been the relatively weak US Dollar,” reckons Jiang Shu, chief analyst at Chinese gold mining group Shandong.
 
“People think that…Trump doesn’t want a strong Dollar and the market thinks that perhaps there would not be a rate hike in the first half of the year.”
 
Gaining 9% so far in 2017, gold’s rising price will now “draw more and more momentum traders into the market,” Shu adds.
 
Comex gold derivatives bets grew yet again last week, new data showed Friday, with hedge funds and other money managers increasing their bullish position – net of bearish contracts – to the highest in almost 3 months in the week to 21 February.
 
Silver’s net speculative long position of ‘Managed Money’ traders grew faster still, reaching 78% of last year’s all-time record high.
Chart of 'Managed Money's net spec long in Comex silver futures & options, notional $bn. Source: BullionVault via CFTC
 
Silver tracked gold prices Monday, retouching a 16-week high at $18.42 per ounce before slipping back.
 
Platinum rose to its strongest level in nearly 5 months at $1029 per ounce.
 
With Trump still to announce his fiscal policy, the new US president complained on Twitter at the weekend that the mainstream media haven’t reported the US national debt falling by $12bn during his first month in power, versus a $200bn rise in the first month of Barack Obama’s presidency.
 
Worldwide sovereign debt is set to reach a new record high of $44 trillion this year, according to an estimate from financial information providers S&P Global, despite a slight reduction in governments’ annual borrowings.

Gold Prices 'Bullish' as ETFs Swell, Equities Drop with Bond Yields, Only Inflation 'Can Fix Western Debt'

February 25, 2017
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GOLD PRICES jumped in London trade Friday, hitting new post-Trump election highs at $1258 per ounce as the Dollar fell again, reversing the week’s prior gains to 6-week highs versus the Euro while world stock markets retreated further from their new all-time highs.
 
Government bond prices rose, pushing longer-term interest rates lower.
 
Gold priced in the US Dollar has now risen for 8 of the last 9 weeks.
 
With the MSCI World Index of global equities hitting new record highs on Tuesday, equity investment funds saw net inflows for the 8th week running, says a note from analysts at Bank of America Merrill Lynch, adding $8.5 billion from 7 days before and $60.8bn for 2017 to date.
 
Now worth an outstanding total of $74bn in contrast, exchange-traded trusts backed by gold have also seen continued inflows, says Dutch bank ING, with the total number of shares in gold ETFs swelling 3% so far this month.
 
“With still a large amount of political uncertainty for this year, this position is likely to continue growing,” says ING.
 
With the gap between French bond yields hitting the widest since the Euro debt crisis of 2010-2012, German 2-year Bunds now offer an annual yield worse than minus 0.9%, a fresh record low, on what Bloomberg reckons “looks like [the German Bundesbank] buying at the front end of the yield curve” after a change in European Central Bank rules on national intervention.
 
Chart of 2-year German Bund yields, last 5 years. Source: Bloomberg
 
The Euro’s rebound on the FX market curbed gold’s gain for French, German and other currency union investors on Friday, edging it back from near 5-month highs at €1188 per ounce, still more than 8% higher for 2017 to date.
 
Gold priced in the British Pound meantime held above £1000 per ounce – a price first seen in mid-2011, and 20% below the peak of 2 months later.
 
Now selling government bonds, “Our long-term outlook [on gold prices] remains bullish,” said hedge-fund manager David Einhorn of Greenlight Capital on a call with clients this week for the metal.
 
“The new [US] administration comes with a high degree of uncertainty,” said Einhorn – who replaced a gold ETF position with physical bullion in 2009 – “and its policy initiatives appear to be focused on stimulating growth and, with it, inflation.”
 
“The Western world has insane amounts of debt,” writes MoneyWeek magazine’s Merryn Somerset-Webb in the Financial Times, warning that history says it will only be “dealt with by inflation.
 
“Gold is the best hedge there is against that. I still hold it…and I will until the finances of our governments are firmly under control.”
 
The giant GLD gold-backed ETF yesterday held onto last week’s 0.3% shrinkage even as prices rose Thursday to new 3-month highs.
 
The giant SLV silver trust also held unchanged in size.
 
Silver prices jumped 2% on Friday from last week’s finish, trading back at $18.36 per ounce – the level reached just before last June’s UK Brexit referendum saw the metal jump 15% in a fortnight to touch 2-year Dollar highs.

Gold Bars Hit Post-Trump High as Fed Fears Inflation, LME 'Cuts Deal' with Bullion Trading Banks

February 24, 2017
Latest News
GOLD BARS traded in London’s wholesale bullion bank market rose to new post-Trump victory highs on Thursday, while the Dollar fell after yesterday’s notes from the Federal Reserve showed the US central bank worried about inflation at its last policy meeting, yet failed to raise interest rates in response.
 
“Many participants expressed the view that it might be appropriate to raise the federal funds rate again fairly soon,” said minutes from the Fed meeting ending 1st February, but only “if incoming information on the labor market and inflation was in line with or stronger than their current expectations.”
 
Consumer-price inflation rose last month to a 5-year high, reaching the Fed’s 2.0% annual target for only the 7th time since 2012.
 
Betting on US Fed interest-rate futures ended last night putting just a one-in-five chance on the central bank raising to a 0.75% ceiling at its mid-March decision.
 
The price of wholesale gold bars today touch $1247 per ounce as the Dollar retreated further from Wednesday’s 6-week highs on the currency market.
 
Silver bullion also jumped, matching gold’s 1% gain for the week so far to touch $18.18 per ounce, also its highest price since Donald Trump was declared the winner of November 2016’s US presidential election.
 
The Euro currency meantime rallied, halving the week’s losses from Wednesday’s pre-Fed drop against the Dollar, after new GDP data showed Germany overtaking the UK to become the developed-world’s fastest-growing major economy for 2016, expanding by 1.9% per year.
 
Commodities also gained as the Dollar fell, with Brent crude oil gaining 2% to near January’s 18-month highs above $57 per barrel.
 
Trading revenues from commodities sank 7% in 2016 to an 11-year low of $4.3 billion for the 12 largest investment banks, a report from analytics firm Coalition said Thursday.
 
“Underperformance in oil was partially offset by an improvement in US power and gas,” the consultancy said.
 
“Metals ended the period flat with some improvement in precious metals.”
 
UK retail and former investment bank Barclays (LON:BARC) – which exited the bullion business in 2016, following major trading house Mitsui and closing its research and trading teams – today said it tripled annual profits last year.
 
Barclays sold its 2,000-tonne capacity London vault – opened only 4 years before in a joint-venture with security specialists Brinks Inc. – to Chinese-owned commodities dealers ICBC Standard Bank for an undisclosed sum.
 
A division of Industrial and Commercial Bank of China Ltd (HKG:1398), ICBC Standard then replaced Barclays as a member of London bullion’s “clearing” group, alongside fellow vault-operating banks HSBC (LON:HSBA) and J.P.Morgan (NYSE:JPM) plus Swiss bank UBS (VTX:UBSG) and Canada-based Scotiabank (TSE:BNS).
Chart of LPMCL's net transfers between clearing members, $ trillion annually
 
London’s bullion market – heart of the world’s wholesale trade in gold, silver and platinum bars – remains an “over the counter” market, where buyers and sellers deal directly with each other, rather than through standardized contracts administered and cleared by a third-party exchange venue.
 
Amid industry comment that the bullion business will stay this way – both because of costs and because liquidity goes where liquidity already exists – trading exchange the LME has apparently agreed a deal with 5 banks, including ICBC Standard, to reward them for getting their clients to use its new London gold futures contract, due for launch in June.
 
The four other banks are market-making members of the London bullion market Morgan Stanley (NYSE:MS), Goldman Sachs (NYSE:GS) and Societe Generale (EPA:GLE), plus French bullion bank Natixis (EPA:KN).
 
Incorporated last August by mining-backed market-development organisation the World Gold Council, the banks’ new business, EOS Precious Metals, will split revenues from the LME’s forthcoming gold futures contract 50-50 with the Hong Kong-owned exchange, according to sources quoted by Reuters.
 
Competitor exchange ICE – now administering the daily LBMA Gold Price benchmark – last month launched a daily gold futures contract which has as yet seen zero volume.
 
ICE will next month add the option of central clearing to the LBMA Gold Price process, enabling buyers and sellers of its new futures contract to trade without any existing relationship with another participant of the auction.
 
Another competitor, the New York-based CME – which already operates the successful Comex gold futures exchange – said in November it would also launch a London contract early in 2017.
 
Shares in HSBC meantime fell again Thursday, taking the bank’s drop since it reported a surprise pre-tax loss for the fourth-quarter of 2016 on Tuesday to 7.5%.
 
For 31 December 2016, HSBC reported bullion holdings worth $15 billion, 34% larger by value from the end of 2015 and likely spread across bars of gold, silver, platinum and other precious metals.

 

Euro Gold Hits Post-Trump High as 'Flight to Quality' Tracks Le Pen's French Poll Ratings

February 23, 2017
Latest News
GOLD PRICES in London’s wholesale market held firm against a rising US Dollar on Wednesday, gaining versus the Euro and British Pound as world stock markets struggled to follow Wall Street higher amid fresh worries over France’s looming presidential election.
 
Closing at fresh all-time highs last night, New York’s S&P500 index has already reached the average analyst’s year-end 2017 forecast, reports Bloomberg, gaining 5.5% so far.
 
Silver prices slipped Wednesday with commodities, dipping below $18 again.
 
Gold in contrast rose towards $1240 per ounce – adding 0.4% for the week so far – even as the US currency gained ahead of today’s release of meeting notes from the Federal Reserve’s latest policy vote.
 
The gap between French and German government bond yields meantime widened again as OAT prices rose more slowly than Bunds, taking the spread near a 5-year record.
 
With the first round of France’s general election set for mid-April, nationalist candidate Marine Le Pen has attracted 2 million women voters who abstained from the 2012 ballot, says research from France’s Sciences Po institute in Paris, backing her “to protect their jobs and their security.”
 
Two of Le Pen’s personal bodyguards were today taken into police custody over allegations she paid them illegally using public funds – an investigation she has blamed on a “political cabal”.
 
Now neck-and-neck with her two main rivals in France’s opinion polls, Le Pen has promised a “return to monetary sovereignty” for the Eurozone’s second-largest economy.
 
Societe Generale's Fixed-Income Daily: Chart of French presidential opinion polls and Le Pen's rating vs. OAT-Bund spreads
 
New data today cut the UK’s earlier GDP growth report for Q4 2016 from 2.2% per year to 2.0%, with business investment falling across the year for the first time since the global finanial crisis of 2009 as the British electorate voted 51.9% to 48.1% to quit the European Union in last June’s Brexit referendum.
 
Sterling gold prices rose Wednesday back to last week’s finish at £995 per ounce as the Pound lost almost 1 cent to the Dollar, dropping towards the bottom of this month’s converging range near $1.24.
 
But the single currency Euro fell harder however, dropping against the Dollar for the 4th session running – and dipping below $1.05 for the first time since mid-January – despite strong German economic confidence data following yesterday’s 6-year high in the Markit Composite PMI survey of Eurozone business activity.
 
That pushed gold priced in the Euro up to €1179 per ounce, its highest level since November 9th’s huge swing on Donald Trump’s election as US president.
 
“The economy is flexing its muscles,” says Societe Generale’s latest Rates Strategy note from the French investment bank’s fixed-income analysts, “but the market remains obsessed with the French election.
 
“As we’ve said before, the OAT-Bund spread is tracking the rise in Le Pen’s implied win probability at the bookmakers…The recent price action [is] suggesting some panic flight to quality.”
 
Inflation across the 19-nation Eurozone rose to 1.8% per year last month, new data confirmed Wednesday. But stripping out volatile fuel and food prices, the so-called ‘core’ index of consumer prices rose only 0.9% from January 2016, holding the pace of inflation unchanged on Eurostat’s figures.
 
“The main weight on the Euro is presently not economic but political,” writes US private bank Brown Brothers Harriman’s head of currency strategy Marc Chandler.
 
“Recent developments in France underscore our argument that the success of the populist-nationalist forces requires some sort of help from the mainstream parties. This was clearly the case in the US and UK, where no populist party was elected, but instead, the populist agenda co-opted by the center-right.”
 
With French center-left candidate (and former investment banker) Emmanuel Macron “shooting himself in the foot,” says Chandler, as Italy’s 5-Star Movement proves that “populism-nationalism…may work better as in opposition rather than as a governing party,” these political events “trump the Eurozone economic data…which shows steady to stronger growth.”
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