Gold News

Demand to Buy Gold ETFs Up Again But Price Slips as Greek Banks Lose ECB Loans, Belgium Denies Pulling Reserves from Bank of England

BUY GOLD prices slipped below $1260 per ounce in London Thursday lunchtime, dropping 3.5% from late-January's five-month high as European stock markets followed Asia lower for the first time this week.
 
Prices to buy gold fell harder for Eurozone investors – now down 5.6% from January's 21-month high – as the single currency rallied on the FX market despite a fresh plunge in Greek banking stocks after the European Central Bank cut lending to the country's financial sector.
 
"Open interest [in gold futures contracts] is declining as prices struggle to break the $1275-80 barrier," says one London bullion dealing desk in a note, looking at the Comex derivatives market, which owners the CME said last night will go entirely electronic by end-June, closing the open outcry pits for lack of demand.
 
"Tells me longs are giving up, and bullish sentiment [in gold] might soon throw in the towel."
 
ETF trust funds, in contrast, "just keep on adding," the note says, with new demand from money managers buying gold exposure at cash prices forcing metal into the SPDR Gold Trust (NYSEArca:GLD) to back its shares again on Wednesday.
 
The GLD's backing has now swollen 63 tonnes over the last four weeks to 768 tonnes, taking its holdings 8.9% above early January's new 6-year low – the fastest percentage growth since the Greek debt crisis first hit financial markets in May 2010.
 
The ECB said yesterday it will no longer breach its own rules by making loans to Greek banks against Greek government bonds, which are rated below the "investment grade" status required.
 
With Athens' new finance minister Varoufakis due to meet German finance chief Schauble in Berlin today, the Syriza-led coalition said it "remains unwavering in the goals of its social salvation program, approved by the vote of the Greek people."
 
Gold priced in Euros today fell 2.2% from an overnight high, dropping to €1101 per ounce but holding above Tuesday's 2.5-week low.
 
The National Bank of Belgium meantime denied a press report that it plans to repatriate some of its 227-tonne gold bullion reserves from the Bank of England in London.
 
The issue is being discussed however, Belgian finance minister Johan van Overtveldt was reported saying earlier this week, with annual storage fees on the country's total gold reserves in London, at the Bank of Canada and via the Bank for International Settlements put at €250,000 per year.
 
Germany's Bundesbank – which cited high storage costs as a reason for repatriating gold reserves from London in the late 1990s – said in 2013 it was paying the Bank of England €550,000 for storing the remaining 438 tonnes, all of which will stay in the UK while gold is repatriated from the New York Fed, which does not charge for storage, and the Banque de France in Paris.

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.

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