Gold News

Bullion Erases Sept' Gain as Base Metal Miners Crash, 'Strong Signals' of Lehmans-Style Financial Crisis

BULLION prices fell sharply in London trade Monday, cutting 1.4% off gold and 3.8% off silver as Western stock markets dropped and base metals sank with crude oil prices.
 
Dropping to $1130 and $14.54 per ounce respectively as the Dollar edged higher on the FX market, gold and silver bullion both erased last week's late gains, retreating to their levels from the start of this month.
 
Platinum fell harder again as VW-owned automaker Audi said 2.1 million of its diesel cars worldwide are fitted with the same testing software used by its parent to cheat US emissions tests.
 
Trading down to new 6.5-year lows, platinum prices also extended their discount below gold prices to a new 3-year record.
 
Base metals giant Anglo American (LON:AAL) meantime sank to its lowest price since floating on the stock market in 1999, while Swiss mining and commodities trading group Glencore (LON:GLEN) sank 29% to new all-time lows – valuing it at 26 pence in the pound compared with the 2011 float – as a new report from South African investment bank Investec said its "gearing" of debt-to-shareholder-equity has reached above 300%, some 7 times its peer group average.
 
"Although I can expect temporary weakness in gold – the sort we saw during Lehman crisis," says one bullion bank's sales desk in a note, "a large move up [of $100-130] could happen intra-day."
 
Confessing that "the gold bug in me has bitten quite hard," the note points to "strong signals from global markets" including confusion over the US Fed's much-delayed "lift-off" from zero, the slowdown in economic growth, and "exhaustion" in the US high-yield corporate bond market – "a leading indicator of further investor deleveraging in the broader markets...[now threatening] a break down...to a repeat of Lehman crisis levels."
 
"Gold's improvement [is] only technical so far," counters Chinese-owned ICBC Standard Bank in a precious metals note, pointing to last week's loss of "momentum" in the gold chart's long-term downtrend.
 
Looking at the latest data from US regulators, "short-covering" by bearish traders closing their bets after the Federal Reserve's no change decision on US interest rates "started the turn...powering the initial recovery," Standard Bank goes on.
 
"ETF flows appeared to be the main driver of the pop up to $1155 last Thursday."
 
The giant SPDR Gold Trust (NYSEArca:GLD) last week added to the gold bullion held to back its shares 4 days running – the longest stretch of growth since September 2012.
 
End-2012 saw the GLD peak by holdings at 1354 tonnes – almost twice Friday's level of 684 tonnes.
 
At its peak by value in late 2011, the GLD was the world's largest ETF, overtaking the US equity market's S&P500 fund and worth some $75 billion.
 
Wholesale bullion trading in China – now the world's No.1 gold mining, importing and consumer nation – was meantime quiet overnight ahead of Thursday's week-long National Day shutdown.
 
Three days after Bloomberg said 5 banks – none of whom own vaulting facilities in London – are pushing with the mining-backed World Gold Council for a move to exchange-traded contracts in the world's wholesale bullion market, Swiss competition regulators said today they're investigating claims of "collusion" between 6 other banks regarding the "spread" they quote between buying and selling prices in gold.

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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