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

in 30-07-2015

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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WGC recommends 6 ways to boost Gold hallmarking in India

in 30-07-2015

Since the introduction of a hallmarking standard in 2000 by the Bureau of Indian Standards (BIS) India has made good progress in developing its hallmarking system.

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A national hallmarking system is an essential component of a successful gold monetisation scheme in India according to the World Gold Council

in 30-07-2015

A new report, Developing Indian Hallmarking – A roadmap for future growth, released today by the World Gold Council, finds that improvements to the hallmarking system in India are essential to a successful gold monetisation scheme. The reportprovides an in-depth assessment of the current Indian hallmarking system and a summary of international best practice methods. It recommends a...

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Polka-Dots, Jeggings and $350 Gold

in 29-07-2015

They seek him here, seek him there. His clothes are loud, but never square...   "GOLD," reckons French investment and bullion bank Societe Generale, "is out of fashion like flared trousers," writes Adrian Ash at BullionVault.   Funny. Because I've been trying to find a pair of trousers with a slight flare – anything, in fact, to escape the tyranny of 'jeggings' now ruling fashion for five years or more.   But no luck. My modest aim of keeping the blood flowing in my legs by avoiding bone-tight drainpipes seems as passé, as outdated, as buying gold. And when it comes to gold in 2015, as SocGen concludes, "No one wants it."    Nice soundbite, but not quite true. BullionVault users continue to buy as they have throughout 2015 to date, and they plan to buy more according to this week's survey of our Daily Update readers.   European coin and small-bar sales meantime remain strong on the latest analysis from consultancy Thomson Reuters GFMS, while larger US investors have returned in force these last two months based on our own data here at BullionVault. Premiums on gold delivered into China suggest demand is turning higher in the world's No.1 consumer nation, despite the summer shutdown in households purchases.   No matter. Rubbishing gold is now all the rage. It's so hip to be down on gold, in fact, that this week's headline-grabbing call for gold below $400 has already been out-done.   "Get ready for $350 gold," says a MarketWatch headline, quoting an academic who apparently forecast the plunge in prices back in 2012.    Only, he didn't. Read the paper which MarketWatch cites, and what the 2012 research actually said was that gold might go down. Or it might go up.   A proper two-handed economist then...right up until the downtrend in gold has already lopped 40% off the price...and calling it lower becomes all the rage.   How very fashionable. As for SocGen's flared trousers... 22 August 2011 (gold $1877, up 17% in 1 month, up 201% in 5 years) "We believe political/economic policy inertia with regard to debt management is likely to continue to drive physical and paper appetite into 2012/13...We expect levels of over $2000 per ounce to be achieved before year-end."   12 Sept 2011 (now $1834, down 4.5% in 1 week from $1920 peak) "Buy gold on dips...likely to reach fresh all-time record highs before year-end."   11 Sept 2012 (down 10% in 12 months to $1736; ETF holdings set new records)  "We remain bullish all precious metals and gold remains the safe choice..."   19 Dec 2012 (slips to $1665, middle of 2011/12 range; ETFs set new records) "Gold – a buying opportunity."   20 March 2013 (gold $1607, down 16% from peak 18 months earlier; ETFs shrinking) "Short gold rallies as bubble is in the process of deflating."   19 July 2013 (now $1295, up 9% from end-June's crash low; won't set another new low until Nov. 2014; about to rally another 10%) "The rebound developing since $1180 looks corrective...H&S [pattern] forming...down trend is to resume soon." Unfair? Maybe. A random selection most certainly, and all from a huge organization with many differing views and analysts.   But the point isn't that SocGen called gold wrong at the top, nor that it called the 2013 gold crash a good three weeks in advance, providing a very smart tip when its trading clients needed it most. The point is that investment banks, and the headline stories which their analysts help fill, tend to reflect what has become fashionable, rather than setting the pace or changing tastes.   That great tip in March 2013 to sell gold, for instance, came before Goldman Sachs said the same, but after Credit Suisse announced what it called the end of the era of gold. By the time that crash found its floor at end-June, the entire industry was bearish. How could it not be?   Of course, the current bearishness sounds like a screaming buy signal to some mining-stock tipsters and fund managers. But as investment legend Warren Buffet said in 2011 – trying to dismiss the bull market in gold which he'd so famously ignored for more than 10 years – "As 'bandwagon' investors join any party, they create their own truth, for a while."   The bandwagon in gold is now rolling ever-more bearish. That could prove self-fulfulling for a while longer yet. Right up until it's no longer true.   Longer-term investors holding a little gold as insurance meantime won't care much either way. Style never goes out of fashion.

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Gold Market 'Quiet, Back to Slow Motion' Ahead of US Fed Decision on Rates

in 29-07-2015

GOLD MARKET trading was quiet in London on Wednesday, as commodity prices slipped again and Western equity indices ticked higher ahead of the July decision on interest rates from US central bank, the Federal Reserve.   The Euro steadied above $1.10 on the FX market – capping gold some 1% above last week's new 2015 lows at €982 per ounce – while major government bond prices fell, nudging US and European yields higher.    "Given the risk of volatility owing to the Fed statement," says Wednesday's note from Chinese-owned ICBC Standard Bank's analysts in London, "the gold market is understandably quiet."   "Gold is back in slow motion mode," says another bullion bank's sales desk.   "The past few days have seen bearish momentum in gold fading [even as] the pace of bearish news has increased."   The gold market "has traded quietly in a relatively narrow range the last couple of days" agrees Swiss bank and London bullion market maker UBS, "mostly due to market participants waiting for clues from the FOMC later today.   "However, there are also indications of physical demand starting to creep in and help support the market."   Shanghai's gold market today saw premiums on the main wholesale contract in China – the world's No.1 consumer market in the first half of 2015, according to consultancy GFMS – rise to $2.70 per ounce above comparable London quotes.   Higher than the last 12 months' average, that marks a bigger incentive for Chinese wholesalers to import bullion from the world market's central vaulting location.   Looking however at Monday's news of a 10-month low in net gold bullion imports to China through Hong Kong, "Physical demand globally is certainly slowing," says Swiss refiner MKS's trading desk, also noting last week's news of weak exports from Switzerland – heart of the world's bar refining industry.   "July's figures will be something to watch," MKS adds, "given they [will] coincide with a -6.5% price reduction" – the kind of move associated with stronger Asian demand in recent years.   Further ahead, says a note from Australia's ANZ Bank on Western investment, "Continued liquidation of gold from exchange-traded funds and the extent of investor positioning in Comex [futures and options] does suggest that prices will stay on the back foot for some time."   Might China's equity market crash "lead to renewed demand" for gold, asks Swiss private bank and gold ETF provider in a note.   "From our point of view, China is the key bullish wildcard for gold as it could trigger a short-covering rally in the futures markets."   With no new economic forecasts or press conference scheduled from the Federal Reserve meantime until the September meeting, analysts today expected "no change" to the Fed's 0% policy, with the outstanding stock of QE bond purchases set to remain unchanged as well.

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Gold Price 'May Rise' on Fed Rate Hike But 2015 Investment Sinks as Global Demand Drops 10%

in 28-07-2015

GOLD PRICES steadied against a falling US Dollar on Tuesday in London, trading around $1095 per ounce as Western stock markets bucked another slump in Chinese equities to    Commodity prices also ticked higher, rising from new 13-year lows on Bloomberg's index, ahead of Wednesday's expected 'no change' decision on US rates from the Federal Reserve.   "It remains our view," says London-based consultancy Thomson Reuters GFMS, "that a US rate hike this year is already priced into the market.   "An increase [at the Fed's September or December meetings] could well prompt a review of asset allocations that leads to an increase in gold holdings."   So far in 2015 in contrast, gold investment in bullion coin slowed to its weakest level since at least 2008 on GFMS's new data, released Tuesday.     "Retail investment – [meaning] demand for bars and coins – fell another 12% year-on-year" in the April-June period, says GFMS, "and is now some 63% below the Q2 2013 peak" despite strength in Europe, notably Germany.   With the gold price averaging 7% below the first half of 2014, total world gold demand in H1 2015 dropped some 10% annually on GFMS's data, with jewelry and investment demand from China – the world's No.1 consumer market last year – dropping "substantially".   Gold prices in Shanghai today edged higher against London quotes, pushing the premium per ounce – an incentive for new imports – up to $2.50 according to Swiss refining and finance group MKS's trading desk.   Less demand for gold bullion to use in 'trade financing' means imports are likely to fall further from June's 10-month low, says GFMS.   "All this gold that was used for financing," agrees Michael Mesaric, CEO of giant Swiss refiner Valcambi – sold this week to Indian jewelry corporation Rajesh Exports for US$400 million – "has been given back.   "There is liquidity in the market and liquidity is cheap. There is no need to use gold anymore," Mesaric told Reuters, forecasting a drop in China's imports of perhaps 40%.   Following today's 1.7% drop in the Shanghai stock market, Beijing assured Chinese investors it will continue to support equities prices after the last 7 weeks' 30% drop, with the People's Bank pumping the equivalent of $5 billion into the money market.   "Physical demand in Asia remains lackluster," says one brokerage today, pointing to "both the Indian and Chinese markets."   "Market participants," says a note from South Africa's Rand Refinery, "will be closely watching the Federal Reserve meeting" for hints of whether a rate rise is coming in September.

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