Gold News

Gold Bullion Rallies as Euro Slips, China Eases Monetary Policy, New Greek Government Meets EU & ECB

GOLD BULLION prices erased half of yesterday's 2.3% drop on Wednesday in London, briefly touching $1270 per ounce after China's central bank eased a key monetary policy tool and new data showed the US adding fewer jobs than expected last month.
 
The Euro currency meantime halved Tuesday's jump on the FX market, sparked by rumors of Greece's new government "backing down" on its aim of renegotiating the bankrupt state's joint ECB-EU-IMF bail-out.
 
Athens' stock market held onto this week's 16% gains today as Greece's new prime minister Alexis Tsipras met with – and was led by the hand by – European Commission leader Jean-Claude Juncker in Brussels.
 
Greece's new finance minister, Yanis Varoufakis, meantime met European Central Bank president Mario Draghi, calling their talks in Frankfurt "fruitful".
 
Broader Eurozone stock markets fell, and gold bullion priced in Euros rose 1.7% from Tuesday's sudden 2-week low, while US crude oil contracts reversed yesterday's surge with a 4% plunge.
 
The People's Bank of China today cut the reserve ratio requirement for major commercial banks by half-a-percent, meaning they must hold 19.5% of funds in reserve against their liabilities to depositor savers.
 
 
Today's PBoC move says Reuters – the first cut to the RRR in two years – could release an extra $1 trillion in new bank lending in China.
 
Following November's surprise cut to interest rates, this "isn't a surprise," says one London analyst, calling it "consistent with the more accommodative stance being taken" by Beijing as China's economic data point lower.
 
New PMI figures today showed China's services sector slowing its rate of growth in January to the weakest level in 6 months.
 
Shanghai's stock market closed the day almost 1% down, but trading volume in Shanghai's main spot gold contract rose to its highest level in two weeks as prices fell.
 
Chinese premiums to London quotes – which invite wholesalers to import metal from the world's main trading hub to its No.2 consumer market – fell from $2 below $1.40 per ounce.
 
Volume in the main "free trade zone" contract, in contrast, sank 95% from yesterday's 2-month high. Premiums on those gold bars of 0.999 fineness turned to a discount of $5 per ounce against London quotes.
 
Back in European trade, major government bonds ticked lower, edging yields upwards for a second day. But Greek 10-year yields slipped 8 basis points to a 2-week low beneath 9.2%.
 
New data from the private-sector ADP Payrolls service today said the US economy added only 213,000 net jobs in January, some 40,000 below analysts' consensus forecasts and the weakest growth since August.

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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