Gold News

Gold Bullion Rallies in Dollars, Squashed by ECB's 'Stimulus' Euro as China's Hong Kong Imports Drop

GOLD BULLION rallied 0.6% against the US Dollar at the start of London trade Tuesday, but fell again versus the Euro after European Central Bank chief Draghi vowed "constant stimulus" to support growth in the single currency's 19-nation bloc.
 
Government bond prices fell across the board but most sharply on Euro debt, pushing 10-year German Bund yields up to 1-month highs of 3.12% per annum as Italian yields shot higher from yesterday's 5-month lows.
 
The Euro meantime shot up towards this month's post-Donald Trump victory highs above $1.12 to the Dollar, pushing the gold price for German, French and Italian investors down near its lowest level since the start of 2017.
 
Recovering two-third of yesterday's $20 per ounce loss, gold priced in US Dollar traded around $1250 – just over 1% higher than its 2017 average to date – as New York opened for business.
Chart of gold price in Dollars vs in Euros. Source: BullionVault
 
"We can be confident that our policy is working and its full effects on inflation will gradually materialise," said ECB president Draghi at the start of a central bank forum at its HQ in Frankfurt, Germany on Tuesday morning.
 
Despite growing analyst chatter over a possible 'tapering' of the ECB's money-creation QE scheme however, "For that, our policy needs to be persistent," Draghi went on, "and we need to be prudent in how we adjust its parameters to improving economic conditions...to ensure that our stimulus accompanies the recovery amid the lingering uncertainties."
 
Global stock markets fell again, pulling the EuroStoxx 50 index down 3% from early May's 2-year high.
 
Crypto-current Bitcoin also fell again, extending its loss from mid-June's new all-time high to more than one-fifth in US Dollar terms, but held 270% higher from this time last year.
 
Having risen 9-fold in two months, challenger 'coin' Ethereum has now dropped over 30% from its record peak of 2 weeks ago today.
 
The release of Draghi's speech coincided with the afternoon gold price benchmarking in Shanghai, which also coincided with a sharp rally in the Chinese Yuan from 1-month lows in its FX rate vs the Dollar.
 
Shanghai's PM Fix rose 0.3% from Tuesday morning's 6-week low in Yuan terms, holding the price of gold bullion landed in the world's No.1 consumer market at an equivalent $9.50 premium per ounce over comparable quotes in London, heart of the world's wholesale trade.
 
New data yesterday said mainland China imported 45 tonnes of gold bullion in May through the city of Hong Kong – set to mark the 20th anniversary of its handover from Britain this weekend – reports German finance group Commerzbank.
 
"This was almost 40% less than in the month before, and a good 60% less than last May," Commerzbank says, "though that was admittedly a month of unusually high imports."
 
Year-over-year, analysis by BullionVault puts China's imports of gold bullion through Hong Kong some 15% below this point in 2016 for the sharpest annualized decline since summer 2015.
 
China's Communist Party regime has since 2014 allowed direct but unstated imports of gold bullion to Beijing, as well as through the industrial and financial centers of Shenzen and Shanghai, all reducing Hong Kong's dominance of the trade.

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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