Gold News

"Avoid Buying Gold" Say Analysts as US Moves 1 Week to Default, India's Import Rules "Work" to Crush Trade Deficit

GOLD BUYING in Asian and London wholesale trade was "quiet" said dealers Thursday morning, with prices again dipping below $1300 per ounce as politicians in Washington mulled a short-term fix to avoid the $17 trillion debt ceiling triggering a government default in one week's time.
 
Silver also eased back, trading below $22 per ounce, as world stock markets rose and major government bonds slipped, nudging 10-year US Treasury yields up to 2.70%.
 
"The inability [of gold prices] to retest recent highs of towards $1350 is a disappointment," says technical analysis from Scotia Mocatta in New York.
 
"The one-month trend line (now at 1324) should limit any tentative rebound with 1317 being an immediate resistance," reckons a chart comment from Societe Generale's technical team.
 
Gold buying in India – the world's former #1 consumer nation – has been so dented by the government's anti-import rules that the country's trade deficit shrank to a 30-month low in September, officials said yesterday.
 
"This is working out as the government intended," the  Financial Express quotes commerce secretary S.R.Rao after India's monthly trade deficit came in below $6.8 billion for the first time since April 2011.
 
Instead of buying gold, many Indian households have turned to silver says the Economic Times, with silver imports already doubling 2012's full-year total over the Jan-Aug. period at 4,073 tonnes according to Thomson Reuters GFMS.
 
"The record high was 5,048 tonnes in 2008," says the paper.
 
Consumers buying gold and silver jewelry in central China's Hubei province have meantime grown their spending 41% by value so far this year, the Xinhua agency reports.
 
Purchases over the first 8 months of 2013 totalled the equivalent of $1.3 billion, despite sharply lower gold and silver prices compared with the same period last year.
 
Here in London today, the Bank of England followed the US Fed, European Central Bank and Bank of Japan in voting for no change to current policy, holding interest rates at record lows and maintaining its £375 billion ($600bn) quantitative easing gilt-buying scheme.
 
The Pound bounced 0.4 cents after the news from a new 3-week low of $1.5910. That helped prices for UK investors buying gold move above £815 per ounce.
 
The last time any member of the UK's Monetary Policy Committee voted to raise interest rates was July 2011.
 
Consumer price inflation in the UK has since averaged 3.2% per year, topping the Bank of England's 2.0% target in all 27 months.
 
"[US Fed] tapering has been postponed not canceled, and is expected by year end," wrote Morgan Stanley analysts earlier this week, adding that Washington's "political stalemate" over the debt ceiling will soon be resolved.
 
"Consequently, we see little immediate upside to the gold price either in the immediate future or next year."
 
"We recommend staying away from gold," said Morgan Stanley analyst Joel Crane overnight, repeating the investment bank's 2014 average forecast of $1313 per ounce.
 
Should the debt ceiling be hit without a resolution one week today, says investment bank and bullion market-maker HSBC in a note, "It is possible that investors move into Treasuries as a safe haven" instead of buying gold, "despite the possibility of US default."

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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