Gold News

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

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."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals