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Gold Bullion Slips from 1-Month High as 'Yuan Shock' Recedes, Silver Firmer, Equities Rebound

August 14, 2015
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GOLD BULLION dropped $10 per ounce from new 4-week highs hit overnight at $1126 on Thursday as the Chinese Yuan fell for a third day on the FX market but commodity and world equity prices rebounded.
 
Silver prices held firmer, ending London trade just 10 cents shy of an earlier 1-month high at $15.60 per ounce, some 8% above late July’s 6-year low.
 
After switching the Yuan’s daily reference point to market- rather than government-determined rates this week, there is “no basis for persistent and substantial devaluation,” said People’s Bank deputy-governor Zhang Xiaohui at a news conference.
 
China’s additional central-bank gold bullion reserves – announced in July and the world’s fifth largest – are “supportive for the gold market,” says the latest Gold Demand Trends from market-development organization the World Gold Council.
 
“After a relatively subdued H1,” it goes on – reporting a 12% year-on-year drop for world gold demand between April and June – “reasons for cautious optimism [include] the onset of the festival and wedding season in India…and tentative signs [of better private-sector] appetite in China.”
 
Gold bullion contracts in Shanghai held flat on strong trade Thursday in Yuan terms, but cut the premium to London quotes from $6 to around $1.80 per ounce as Asian and notably European stock markets rallied hard.
 
“Today’s further 1.1% weakening in the Renminbi’s reference rate is no longer a shock for the market,” says Chinese-owned ICBC Standard Bank.
 
“A degree of calm has returned to the base metals complex” after this week’s fresh plunge to new multi-year lows.
 
“A Yuan devaluation of even 5%,” says Australian investment bank Macquarie’s analyst Matthew Turner, is very small in comparison to the swings in Yuan metal prices we have seen this year – in some cases 20-30%.”
 
Looking ahead, “The devaluation is [more] symptomatic of the underlying problems for commodities than a new bear factor in its own right.”
 
“This is another bearish catalyst [for commodities], but not much,” agrees Swiss bank UBS’s analyst Daniel Morgan, speaking to The Australian Financial Review.
 
“At the margin, somebody will demand less quantity at the price offered in the market…[But] it’s a bear market, and it keeps grinding.”
 
For precious metals, on the other hand, “China’s decision to devalue could offer support for gold and more specifically [for mining] equities,” reckons a note from Germany’s Deutsche Bank, upgrading its view of several producers including major gold miners Barrick (NYSE:ABX) and Newmont (NYSE:NEM).
 
Ratings agency Moody’s yesterday cut its view on $10 billion of Barrick’s debt by one notch to Baa3, one level above so-called “junk” status but now seen as “stable” with that investment-grade rating.
 
Bullion holdings at the giant SPDR Gold Trust (NYSEArca:GLD) yesterday saw the first inflow – needed to back the number of shares in issue – since mid-July, taking the total to 671 tonnes, a fresh 7-year low when first reached last week.
 
Tuesday’s rise in silver prices, in contrast, saw holdings at the iShares Silver Trust (NYSEArca:SLV) fall to the lowest level in two months at 10,107 tonnes, down some 2% from this year’s highs and 7% below late-2014’s peak when prices fell hard in November.
 
“Silver breached technical resistance at 15.30 and looks set to test 16.00,” reckons a trading note from Swiss refiner and finance group MKS.
 
“The next major level to watch for gold is the break-out level from early last month when the market gapped $50 lower at $1130/32.”

'Currency War' Sees Gold Bullion Rise for 5th Day as Yuan Falls Again, Euro Stocks Slump

August 13, 2015
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GOLD BULLION rose for a fifth session running on Wednesday, recording a London benchmark of $1119 per ounce as stock markets fell again amid a fresh drop in the Chinese Yuan.
 
Linking the Yuan’s reference rate to FX market values from Tuesday – rather than an official target level – the People’s Bank of China today said “there is no basis for persistent depreciation” of its currency.
 
But the Yuan dropped again, down 1.6% to four-year lows at one point, before suddenly halving that drop inside 5 minutes at the close of Shanghai trade.
 
Bullion priced in Yuan rose steeply again in near-record trade on the Shanghai Gold Exchange, gaining a premium over comparable London quotes of $6.50 per ounce – three times the last 12-months’ average and a strong incentive for new imports into the world’s No.1 consumer nation.
 
Silver prices rose twice as fast as gold in Dollar terms, hitting 1-month highs at $15.58 per ounce.
 
Eurozone stock markets lost 2.5% for the day as the single currency – currently subject to €60 billion of monthly QE by the European Central Bank – rose to 1-month highs against the Dollar, 2-month highs against the Japanese Yen, and 6-month highs vs. China’s Yuan.
 
That also capped the price of gold bullion in Euros near the last 4 weeks’ average of €1000 per ounce.
 
“Gold is benefiting from fears that this is a new round of ‘currency war’,” says Australian investment bank Macquarie’s precious metals analyst Matthew Turner in London, referring to exporter nations seeking an easy competitive advantage through devaluation.
 
“Talk of a currency war has prompted the move to gold,” agrees Barnabas Gan, an economist at Singapore-listed Asian bank OCBC, although the jump in prices “is all about how equities are not doing so well.”
 
“The actions of the Chinese central bank,” says Eugen Weinberg’s commodities team at Germany’s Commerzbank, “could lead to a devaluation race between currencies, especially in the Asian region, which should benefit gold.”
 
“Lower rate hike expectations are also giving gold a boost,” Commerzbank adds, noting that US interest-rate futures now put the odds of the Federal Reserve raising from 0% in September at one-in-three, down from a record 50% at the end of last week.
 
Having moved higher for 5 days – and taken out what Commerzbank’s weekly technical analysis previously saw as ‘resistance’ at $1114 per ounce – gold prices next face a hurdle at $1131 its latest chart-book reckons.
 
“The two-day consecutive close above $1105,” says London bullion market-maker Scotia Mocatta’s daily technical note – pointing to what it previously identified as resistance – “improves the likelihood that we have entered the correction phase of our large drop from [May’s 3-month high at] $1232 to [end-July’s new 5-year low of] $1078.
 
“The initial 38.2% Fibonacci target retracement is seen at $1137.”
 
Also applying Fibonacci ratios, “Another leg of [this] up move should unfold near term towards $1122 to $1226,” says Stephanie Aymes’ technical analysis at French investment bank and bullion market maker Societe Generale.
 
A “stiff hurdle” awaits at $1130-$1146, Aymes says – “the validation level” of a Head and Shoulders pattern signaling a return to $1080 and then targeting $1045 in the next 1-3 months.

Gold Jumps as PBoC Devalues Yuan to Boost Exports, China's Demand Seen 'Supporting' Prices as Stockpiles Run Down

August 12, 2015
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GOLD PRICED in Dollars hit a 3-week high early Tuesday, touching $1118 per ounce after Beijing surprised currency traders and analysts by announcing an immediate 2% devaluation in the Chinese Yuan’s official exchange rate.
 
Gaining 1.8% against the Dollar in the last hour of Shanghai trade, gold prices hit 4-week highs for Chinese traders on the heaviest-ever volume in the city’s main gold bullion contract.
 
Silver bullion extended Monday’s jump through $15 per ounce, touching 4-week highs against the Dollar above $15.40 and rallying $1 per ounce from last week’s trip back to July’s new 6-year low.
 
Gold prices for Eurozone investors, in contrast, quickly lost a 1.4% spike to €1013 per ounce, dropping back to struggle just above €1000 as the 19-nation single currency jumped against all major competitors on the FX market. 
 
Ordering Chinese banks to re-align their Dollar/Yuan reference rate – and resulting in an immediate drop to 3-year lows for the CNY – the People’s Bank of China said the move would  “enable the exchange rate to play a key role in adjusting foreign exchange demand and supply.”
 
“The only surprise is that the PBoC has not acted sooner,” says economist Francis Coppola at Forbes magazine online, pointing to the Shanghai stockmarket’s 25% crash, as well as the “massive over-leverage of the Chinese economy”, and the sharp drop in Chinese exports, especially to Europe and Japan.
 
The Yuan’s real exchange rate had risen 14% since mid-2014, notes former Bank of England policy-maker Andew Sentance, hurting its export-dependent economy.
 
New data overnight showed new bank lending in China surging by a record amount in July, as the broad money supply grew at its fastest pace in a year, expanding 13.3% from the same month in 2014.
 
Beijing’s move “could possibly kill off the September rate hike” from US central bank the Federal Reserve, reckons UK brokeage ADS Securities, “as any further gains by the Dollar could cause more problems for the US economy.”
 
Two Fed policymakers said separately on Monday they were preparing to vote for a rate hike at next month’s meeting.
 
But having forecast a Chinese devaluation earlier this summer, Societe Generale’s strategist Albert Edwards last month warned that slowing global growth – coupled with today’s record government debts – means “QE will be stepped up to such a pace that you will hear the roar of the printing presses from Mars.
 
“Gold is a must-have holding in that world.”
Shanghai Gold Exchange, Au(T+D) price and volume
Shares in China’s largest gold miner, Zijin Mining (SHA:601899), today jumped almost 10%, leading sharp gains for precious metals shares on the Shanghai stock market.
 
Gold priced in Chinese Yuan ended Tuesday’s trade some 2.2%.
 
New data from government-approved trade body the China Gold Association meantime put gold consumption down just 1.4% in the first half of 2015 from the same period last year, contradicting weaker gold imports data through Hong Kong.
 
“In other words,” says a commodities note from Germany’s Commerzbank, “[wholesale] stocks were reduced between January and June, which means [they] now need to be replenished.
 
“This could result in higher Chinese gold imports in the second half of the year, which should in turn lend support to the gold price.”
 
However, gold mining output in China – the world’s No.1 producer nation since 2007 – grew a further 8.4% on the CGA’s data, matching 40% of private jewelry, investment and industrial demand.

Gold Prices 'Defy' US Fed Rate-Rise Outlook as Small Comex Traders Go Record Bearish, Indian Wholesalers Buy

August 11, 2015
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GOLD PRICES held firm in a tight range Monday in London, trading above $1095 per ounce – and reclaiming €1000 for Euro investors – as commodities rallied but government bond prices fell, nudging yields higher, on new comments about a September rate hike from the US Federal Reserve.
 
Ten-year US Treasury yields hit 2.21% but held one-fifth of a per cent lower from 1 month ago after Fed vice-chairman Stanley Fischer claimed “a large part of the current [low] inflation is temporary.”
 
“It has to do with the decline in the price of oil [and] raw materials,” Fischer told Bloomberg TV.
 
Bond investors, however, are “bet[ting] on decades of low growth and inflation” to come, says the Financial Times, reporting Dealogic’s estimate of a record $253 billion of long-dated debt – maturing in 3 decades or more – sold by governments and private companies worldwide so far this year. 
 
Trading just shy of $1100 per ounce, the gold price “has managed to defy [Friday’s] sound US labour-market figures,” says German bank Commerzbank, even though those data “make a Fed rate hike in September more likely.
 
“Once the uncertainty about the Fed’s course starts to fade, the price of gold should rise.”
 
Short-covering by bearish traders in US gold futures and options “should eventually lead to gold back above $1100,” says Swiss bank and London bullion market maker UBS today.
 
Hedge funds and other speculative traders last week trimmed their bearish bets faster than their bullish contracts as a group, but retained a net bearish position overall for the third week running.
 
So-called ‘non-reportable’ traders meantime held a larger net bearish position according to data gathered by US regulator the CFTC, with those smaller, often private individual traders holding their biggest balance of short over long contracts since records began 20 years ago.
US Comex gold futures & options, non-reportables' net position
 
“In spite of relatively disappointing response from physical markets thus far,” UBS goes on, pointing to gold’s major consumer markets in Asia, “we expect an improvement in this market segment and lead a recovery further out, especially as seasonality kicks in.”
 
Even during the usually quiet summer months for Middle Eastern gold demand, “As prices are dipping, we are witnessing a huge rush in our showrooms,” the Times of Oman quotes one regional retailer.
 
“Since the last week of June, we have witnessed a sudden jump in the demand for gold jewellery,” adds Mumbai-based gold retailer Dinesh Jain, managing director of P.M.Shah Jewellers, speaking to the Asian Age and reporting a 50% increase in July’s demand from the same month in 2014.
 
“Jewellers have increased buying for the peak festive season, replenishing inventory,” adds a senior trader at Edelweiss Metals Ltd in Mumbai.
 
Gold’s price drop to new 5-year lows in July may have spurred 80 tonnes of bullion imports to India – the world’s No.1 gold consumer nation in Q2 – according to some local reports, twice the expected level.
 
“It seems to differ depending on who you talk to,” one India dealer says, “but one thing is for sure – there is a lot of material around.”

Gold Investing 'Lacks 5 Key Drivers', Seen Sub-$1000 Post-Fed Hike as Bank of England Delays, US Jobs Data Awaited

August 7, 2015
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GOLD INVESTING prices stayed tight inside a $10 range in London on Thursday, rising to $1090 per ounce as New York stock markets opened sharply lower and European equities held flat ahead of tomorrow’s much-anticipated US jobs data for July.
 
US crude oil contracts fell 1.5%, dropping near 6-year low at $44 per barrel.
 
Major government bond prices rose, pushing 10-year UK Gilt yields down to 1.93%, some 4 basis points below yesterday’s 2-week high, after the Bank of England voted 8-1 to leave its key interest rates unchanged for the 77th month running.
 
“It is more likely than not that gold prices will drop below $1000 in the period after the Fed announces its first interest rate hike,” says a note from French investment and bullion bank Natixis, expecting the US central bank to raise rates from 0% in September.
 
“It is hard to see support for prices [now that] the five forces behind the rise in gold prices,” Natixis says, pointing to Western ETF investing, net demand from central banks, weak Indian buying, the end of US quantitative easing, and now the weakening of demand in China – “the buyer of last resort” when prices crashed in 2013.
 
But “with so much [bullish] length already eliminated,” says market maker Mitsui Global Precious Metals, looking at speculative positioning in US Comex derivatives contracts, “it will probably take fresh shorts to force gold lower again from here.
 
“On the other hand the support on dips towards $1080 appears to have come largely from profit-taking and from passive-type [or] institutional buyers – not the sort to chase it higher.”
 
Investing through the giant SPDR Gold Trust (NYSEArca:GLD) shrank again Wednesday, cutting the amount of bullion needed to back the fund’s shares another 3 tonnes to a fresh 7-year low of 668 tonnes, down 43 since the end of Q2.
 
“All eyes are on the non-farm payrolls released on Friday,” says the trading desk at Swiss refinery and finance group MKS, noting that gold “was heavily offered and just as quickly trad[ed] back down” from $1090 on Wednesday when the private-sector estimate from ADP Payrolls showed US jobs hiring “softer than expected.”
 
“Gold remains glued to the lower end of our multi-year range at current $1086,” says Canada-based bullion bank Scotia Mocatta.
 
“Gold has stabilised,” says technical analysis from  French investment bank and bullion market maker Societe Generale, “above the earlier highlighted pivotal support of $1080,” defined by a long-term channel on gold’s 45-year chart and also the 50% retracement gold’s bull market from 1999-2011.
 
“However, any rebound should be of corrective nature and short-lived,” it adds, pointing to resistance at $1093 from “the down sloping channel since mid-June and the upper limit of the past week’s range.”

Gold Price 'Holding Well' vs. 50% Odds of Fed Rate Rise in Sept as ADP Jobs Data Miss Forecast

August 6, 2015
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GOLD PRICE gains of 0.7% were reversed in late London trade Wednesday, taking wholesale bullion back to $1085 per ounce as the Dollar rose despite new US jobs and trade data badly missing analyst forecasts.
 
Only a “significant deterioration” in US economic data will dissuade Federal Reserve governor Dennis Lockhart – widely seen as a ‘centrist’ – from voting to raise rates in September, he told the Wall Street Journal yesterday.
 
“I think there is a high bar right now to not acting, speaking for myself,” he said.
 
Ahead of Friday’s official non-farm payrolls estimate, today’s figure for additional US jobs in July from private-sector payrolls provider ADP came in at 185,000, lagging Wall Street’s average estimate by 30,000 – the worst ‘miss’ below consensus forecasts since April.
 
The US balance of imports and exports meantime showed its worst July trade deficit since 2011, more than $1 billion wider than analysts predicted at $43.8bn.
 
The Dollar rallied against the Euro however, pushing the single currency back 1 cent from an earlier rise above $1.09 on the FX market.
 
That held the gold price in Euros unchanged for the week at €998 per ounce, just shy of what were 15-month highs when bullion rose sharply at the start of this year.
 
“The market responded [to Lockhart’s comments] by pricing in a rate hike in September with a likelihood of 50%,” note commodities analysts at German bank Commerzbank – the strongest odds priced by interest-rate traders so far in 2015.
 
“Against this backdrop,” Commerzbank says, “we believe that gold is still holding its own relatively well…We assume the gold price will remain under pressure until the first interest rate rise. The price should climb again just as soon as uncertainty over the timing diminishes.”
 
“The market,” agreed a note from analyst David Jollie at market maker Mitsui Precious Metals last week, “should not be surprised when rates rise. This has been signalled in advance by the Federal Reserve for a long period of time.
 
“Once rates do start to rise, the market will have to focus on other issues…and sentiment [on bullion] could simply become more bullish as a result.
 
“We remain positive that gold prices should be higher at the end of the year than they are currently.”
 
Silver tracked gold prices in London trade Wednesday, easing below $14.60 per ounce to stand 1.5% beneath last week’s finish against gold’s 1% Dollar drop.
 
Today meantime in China – source of the world’s largest private demand in H1 2015 – Tuesday’s zero volume on Shanghai’s international gold bourse was followed by light trading in the iAu9999 kilobar contract.
 
It closed however at a discount to comparable London quotes – the global price benchmark – of $31.50 per ounce, some 2.9%.
 
That contrasts with an average premium of $1 per ounce above London since the SGEI was launched last September.
 
Shanghai’s main domestic contract closed solid trade Wednesday at a premium of $2 per ounce, in line with the last 6 months’ average.
 
World No.2 consumer nation India will likely import some 900-1000 tonnes of gold this financial year, reckons Rajesh Khosla, managing director of government-backed refiner MMTC-PAMP – matching or beating the last fiscal year’s total by weight.
 
The lower gold price, however, could cut India’s gold import bill by almost one fifth, Khosla says, easing pressure on the country’s heavy Current Account Deficit.

Bullion Rallies as Shanghai's International Gold Market Hits Zero Volume, Silver ETF Sheds Metal

August 5, 2015
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BULLION prices rallied 1.1% on Tuesday in London from yesterday’s low in Dollar gold prices, as China’s stock market bounced hard following a ban on short-selling by equity traders, but Western stock markets held flat overall.
 
Silver bullion recovered half of Monday’s 2.6% drop to trade at $14.60 per ounce as commodity prices rallied from last week’s slump.
 
Gold held above $1090 per ounce after new data showed US factory orders expanding 1.8% in June as analysts forecast, but economic optimism slipped to the weakest in 9 months.
 
Shanghai premiums on gold kilobar contracts – over and above comparable quotes in London, the wholesale benchmark – earlier rose to $3.25 per ounce, higher by one-fifth from the average incentive for new Chinese imports of the last 6 months.
 
Trading volume in the Shanghai Gold Exchange’s international market, however, fell to zero for the second time since early July, when a collapse in liquidity on the SGEI – now with 52 foreign member firms including major bullion banks HSBC, J.P.Morgan and UBS, all able to trade using Yuan held in offshore accounts – coincided with a 30% crash in Shanghai’s stock market.
 
Reports in India – which reclaimed the world’s No.1 spot for gold demand from China in the second quarter of 2015 – today said details of the government’s “gold monetisation” plans to reduce imports by boosting domestic recycling have been finalized at a cabinet meeting, setting the minimum investment for new gold savings accounts at 30 grams.
 
At current prices, and just shy of 1 Troy ounce, that equates to 65% of India’s average annual income on World Bank data.
 
Australia’s Perth Mint meantime echoed overnight the US Mint’s report of strong bullion sales in July. But this surge of private investor gold demand “is simply not significant enough to move the needle in terms of pricing,” reckons a note from US brokerage INTL FCStone.
 
“The category that can [move] prices, of course, is the ETF/investment space, but as we have seen for some time now, outflows from these vehicles remain very much in place.”
 
Outflows of gold from the giant SPDR Gold Trust (NYSEArca:GLD) yesterday paused after the worst monthly liquidation since 2013 took its holdings down to new 8-year lows.
 
Silver’s largest exchange-traded security – the iShares Silver Trust (NYSEArca:SLV) – in contrast shed 15 tonnes of metal on Monday, the first liquidation by SLV shareholders since late June.
 
That took the quantity of bullion needed to back the silver ETF’s outstanding shares some 0.1% lower to 10,150 tonnes – equal to around one-third of last year’s record world mining output.
 
“Spot gold has consolidated sideways over the past 2 weeks,” says Karen Jones at German retail and commercial bank Commerzbank in her weekly bullion technicals report, “having recently met the 50% retracement of the entire bull move up from the 1999 low.
 
“This was located at $1087 and represented a major long term downside target for us,” Jones says, forecasting another month of “sideways” action in gold bullion prices, with support at late July’s new 5-year low of $1077 per ounce, and resistance at $1131.
 
“Gold continue[s] to consolidate recent losses,” agrees daily technical analysis from bullion bank Scotia Mocatta, also calling July’s low “the key support level for gold.”
 
Short term, Scotia’s team “maintain a target of $1044…the low from February 2010.”

Bullion Avoids Base Metals' China PMI Sell-Off But 'Gold Bandwagon' More Bearish Amongst Money Managers

August 4, 2015
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GOLD BULLION held in a tight $4 range either side of $1093 per ounce in London on Monday, trading sideways as industrial metals sank to new 6-year lows following the weakest Chinese manufacturing data in two years.
 
Fresh falls in new factory orders led to the fastest production cut since November 2011, said the July purchasing managers index for the Caixin news agency from consultancy Markit.
 
Markit’s manufacturing PMI survey for the Eurozone showed a surprise rise, near the strongest growth of the last year.
 
US manufacturing activity missed forecasts, in contrast, slipping to a 3-month low on the Institute for Supply Management’s PMI.
 
“Gold trades sideways,” says one bullion market-maker’s trading desk, pointing to “support” at $1078 per ounce, while “Silver is beginning to show signs of a recovery above $14.50.”
 
Silver prices today tracked gold bullion, reclaiming half of a tight 10-cent drop from Friday’s close to trade around $14.72 per ounce.
 
For base metals, “The really poor Chinese manufacturing data would be the primary concern,” Reuters quotes one analyst.
 
“[Nor has there] been any stabilisation of Chinese stocks, despite all the efforts by the government.”
 
The Shanghai stockmarket today lost another 1.1%, extending its drop from June’s 7-year high to 30%.
 
“Physical [gold bullion] demand continues to cushion further price declines,” says Japanese conglomerate Mitsubishi’s precious metals analyst Jonathan Butler in his weekly note, pointing to the US Mint reporting a fourfold surge in sales of gold Eagle coins in July, plus a doubling of trading volume on China’s Shanghai Gold Exchange.
 
“We attribute this to a combination of attractive gold prices,” says Butler, “[but also] liquidations to meet margin calls on equity market losses.”
 
At the retail level in China, “Both customer flow and sales of our gold products saw a notable increase recently,” the Wall Street Journal quotes a spokesperson for Chow Tai Fook, China’s largest jewelry retail chain.
 
The quantity of bullion needed to back the giant SPDR Gold Trust (NYSEArca:GLD) shrank last month at the heaviest pace since December 2013 marked the end of that year’s 30% price crash.
 
With Western investors liquidating 39 tonnes-worth of shares in July, that took the GLD’s holdings to a new 7-year low of 672 tonnes.
 
Hedge funds trading Comex gold futures and options meantime held more bearish than bullish contracts as a group overall last week, extending their first such ‘net bearish position’ since current records began in 2006.
 
“Increasingly,” Bloomberg quotes one small investment-fund manager, “you’re seeing that other than ardent gold bugs, very few people are on the gold bandwagon.
 

Gold Trading Spikes on Weak US Data, Dollar Price Avoids 5th Weekly Drop

August 1, 2015
Latest News
GOLD TRADING in London on Friday afternoon saw wholesale prices jump 2.1% from an early low, briefly popping above $1100 per ounce as the US Dollar fell hard following weaker-than-expected consumer sentiment data for June.
 
US employment costs also missed analyst forecasts, with compensation and wages slowing to a 0.2% rise in Q2 from 0.7% in Q1.
 
The Euro jumped 1.5 cents against the Dollar to reach a sudden 2-day high above $1.11 in FX trading.
 
Gold then cleared Friday afternoon’s benchmark auction in London at $1098.40 per ounce, avoiding a fifth weekly drop in succession – a run last seen in late 2014 and the summers of 2004-08.
 
July’s run of 4 weekly losses was 2 weeks short of summer 2000’s drop, and well short of summer 1996’s 10-week run.
 
Friday’s pop still left gold trading some 6.2% lower from the end of June, its heaviest 1-month drop since the gold crash of spring 2013.
 
Western coin mints reported heavy demand for July, with Australia’s Perth Mint “surprised” at the strength of demand on this price drop.
 
Friday’s trade in Shanghai gold contracts held firm on the main wholesale contract in China, the world’s No.1 gold buying market in the first 6 months of 2015.
 
But volume in contracts for the kilobars preferred by Chinese investors fell sharply to less than half recent averages as its price rose to a premium above London quotes of nearly $3.75 per ounce, near the highest levels this month.
 
Hong Kong’s wholesale dealing “[saw] demand only on Monday,” Reuters quotes Ronald Leung at Lee Cheong Gold Dealers, reporting a small premium to London quotes of around $1 per ounce in the Asian gold trading hub.
 
“I think people are still bearish on gold because everyone is seeing all [this] bad news like a rate hike in September. No one wants to buy for now.” 
 
Gold trading through London’s wholesale market – heart of the world’s professional bullion deals – fell in June to the lowest Dollar value since April 2010, new data said Friday.
 
Daily volumes dealt between the clearing members of the London Bullion Market Association averaged below $20 billion in June, down from a peak above $45bn in August 2011.
 
“We are bearish,” says a technical analysis from Canada-based bullion bank Scotia Mocatta, “looking for another leg lower to target 1044 – the 2010 low.”
 
Thursday’s data from the SPDR Gold Trust (NYSEArca:GLD) showed the exchange-traded gold fund holding 680 tonnes of bullion to back its shares – a 7-year low unchanged from the end of last week.

Bullion Near 5-Year Lows, 'Driven by Fed Rate-Hike Expectations' as Inflation Curbs US GDP Growth

July 31, 2015
Latest News
BULLION GOLD headed for its worst monthly drop in two years on Thursday, nearing the end of July almost 7% down against the Dollar after weaker than expected US GDP data followed the Federal Reserve’s latest hint that the central bank is preparing to raise interest rates from 0% in September.
 
Premiums on Shanghai gold bullion contracts had earlier slipped back to $1.75 per ounce above London quotes, reducing the incentive for new imports to China – the world’s No.1 consumer market.
 
Silver bullion then held firmer than gold, trading 2.7% above last week’s new 6-year lows but losing more than $1 per ounce from the end of last month to clear at $14.64 at Thursday’s midday benchmark price-setting auction in London.
 
Gold priced in Dollars ended London trade 1.2% above the new 5-year low hit last Thursday, recovering $10 of an earlier $20 drop following yesterday’s release of the US Fed’s July statement.
 
“Expectations of higher rates are one of the factors that has driven gold lower since early 2013,” says Mitsui Global Precious Metals analyst David Jollie, also pointing to “the accompanying” strength in the Dollar.
 
“Once rates do start to rise, the market will have to focus on other issues…and sentiment could simply become more bullish as a result.”
 
Wednesday’s Fed statement called the current 0% target for US interest rates “appropriate” more than 6.5 years after it was introduced, but again said “a wide range of information” will affect the central bank’s “assessment” of when it becomes “appropriate to raise the target range”, notably “further improvement in the labor market” plus greater confidence that “inflation will move back to its 2% objective.”
 
A surprise jump in personal consumption expenditure prices – a key inflation measure tracked by the Fed – worked to curb economic growth below analyst forecasts, new GDP data showed Thursday.
 
The US economy expanded by 2.3% annualized between April and June, the Bureau of Economic Analysis said.
 
That growth was deflated by a 2.0% annualized rise in prices, the BEA’s data showed – the fastest rate of inflation since Q2 last year, and well above the 1.4% averaged since start 2012.
 
“The overall message sent by the [Fed’s] statement is…one of continued data dependency,” notes bullion refiner MKS’s trading desk, “with no catalyst for markets to bring forward Fed rate hike pricing materially.”
 
“As a result we are still reliant on the intervening economic data,” agrees Chinese-owned investment and bullion bank ICBC Standard Bank, “with either the Fed putting its money where its mouth is and hiking in September, or using better data to tighten the language in [that month’s] statement with a view to hiking rates in December.”
 
As the Fed released Wednesday’s statement, “Gold closed near $1095 for the eighth consecutive day,” notes bullion market-maker Scotia Mocatta, and is “now flat-lined after the $100 drop from $1200.
 
“The lack of any bounce from that move suggests that the down side remains the risk.”
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