Gold News

Gold Bullion Halves Friday's 2.6% Jump as Greece Spurns Troika's 'Debt Drug', China Demand 'Terrific' Ahead of 2015's Late Lunar New Year

GOLD BULLION prices fell Monday in London's wholesale market, halving Friday's 2.6% gains to trade below $1270 per ounce – some 7% higher from this time in January.
 
Asian stock markets closed sharply lower after China showed weaker-than-expected manufacturing activity on new PMI surveys.
 
European stock markets meantime cut their earlier gains, capping Germany's Dax below last week's fresh all-time highs, as Greece's new finance minister Yanis Varoufakis – flying economy class – continued meeting counterparts in Paris, London and Rome to ask for a renegotiation of Athens' debt.
 
Gold bullion priced in Euros fell below €1120 per ounce, a 20-month high when first reached in late January, as the single currency held steady near decade-lows on the FX market.
 
The final €7.2 billion of the ECB-Eurozone-IMF troika's €240bn bail-out starting 2010 is due at the end of February.
 
But while "it's not that we don't need the money," says Varoufakis, "we have resembled drug addicts craving the next dose.
 
"What this government is all about is ending the addiction."
 
"Whether or not Greece ultimately exits the Euro," says a note from London-based forecasters Capital Economics, "we expect the price of gold to be boosted further this year by the return of safe-haven demand as [that] country's financial problems drag on."
 
"The evidence so far," says an Asian bullion-dealing desk, pointing to the new Syriza-led government's cancelled privatizations, re-hiring of public-sector redundancies, and 50% rise in Greece's minimum wage, "looks as if a full-scale confrontation ahead of February’s bail-out extension is more rather than less likely.
 
"Expect gold volatility to rise."
 
"Gold's recent price strength," adds Robin Bhar at French bank and London market maker Societe Generale, "can [also] be attributed to fears of a weaker global economy [and] strong physical demand ahead of the Chinese New Year."
 
New data today showed US consumer spending falling at the fastest pace in 5 years at the end of 2014.
 
Sales of American Eagle gold coins by the US Mint last month fell 11% year-on-year, recording the weakest January – typically a strong month on the issue of a new year's coin – since 2008.
 
Manufacturing activity in China – the world's second-largest consumer market for gold bullion behind India – shrank for a second month running in January according to both the HSBC/Markit and also the China Federation of Logistics' purchasing managers' indices.
 
Sales of gold bullion through the Shanghai Gold Exchange, in contrast, "had another terrific week" notes Jonathan Butler at Japanese conglomerate Mitsubishi.
 
"The run up to the Chinese New Year is always a busy time for the bullion trade, as this is the main gift-giving period."
 
2015's late start to the lunar New Year, marking the start of the Year of the Goat on February 19, "gives [China's] retailers extra time for a marketing push" Butler adds.

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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