Gold News

Gold Bullion at 8-Month Low on "Weak" Demand as China "Gains Pricing Power" with New Contracts & Trading Exchange

GOLD BULLION prices rallied $7 per ounce Thursday lunchtime in London after hitting an 8-month low beneath $1240.
 
Earlier touching 3-week and 1-month lows respectively, the bounce for gold bullion priced in Euros or Sterling was more muted, as the Dollar weakened following a surprise jump in weekly US jobless claims data.
 
Silver meantime touched its lowest Dollar level since end-June 2013 at $18.66 per ounce, barely 40¢ above its lowest price in more than 5 years.
 
Major government bond yields eased back as prices rose, but Europe's key Brent crude oil contract again held below $100 per barrel – a record high when first reached in early 2008 – after new data from China showed a marked slowdown in consumer-price inflation.
 
Money-supply growth in China, the world's second-largest single economy, also slowed in August, falling to a 5-month low of 12.8% per year.
 
Global food prices last month hit their lowest level since September 2010, according to a United Nations' index of 55 goods – down 3.6% from July.
 
"We have had disappointing growth data and the Dollar is very strong," Bloomberg quotes Barclays' analyst Kevin Norrish.
 
"Growth now looks a bit less promising and supplies in many commodities are quite robust.”
 
Gold bullion's "traditional monthly strength" in September is clearly missing, says a note from analysts at Deutsche Bank, disappointing bullish traders thanks to "generalised weak demand...
 
"We have been warning about the risk of a further decline to 1204.00 some time," Deutsche's team says. 
 
"However, interim support from near-term buyers is now likely to be found [around] 1241.00."
 
The all-in cost of sustainable gold mining – taken by many analysts as a long-term floor for market prices – fell in the second quarter of 2014 to average $960 per ounce across the major producers, says a note from French investment and bullion bank Natixis.
 
"At the same time," it adds, "the largest "Western producers have been able to maintain the same level of production."
 
The Shanghai Gold Exchange – through which bullion reaches wholesalers in the world's largest gold-mining and consuming nation – said today it will now launch its international gold bourse in the city's free-trade zone on 29 September, offering three Yuan-denominated contracts to foreign institutions for each of 100 grams, 1 kilo and 1 large London Good Delivery bar (around 12.5kg or 400 Troy ounces).
 
Shanghai's domestic gold prices on Thursday tracked Dollar prices down to 7-month lows, but extended their premium to London quotes to $2.80 per ounce, suggesting stronger demand on solid trading volumes.
 
Today at the China Gold Congress event in Beijing, market development organization the World Gold Council signed a co-operation agreement with the China Gold Association, aimed at sharing research and data, and building "innovations for gold in investment, technology and jewellery."
 
China is "at the centre of the global gold market," says the gold-mining backed World Gold Council (an investor in BullionVault).
 
Founded in 2001 by China's State Economic and Trade Commission, plus the People's Republic's Ministry of Civil Affairs, the non-profit China Gold Association is comprised of gold explorers, miners, refiners, wholesalers and investment companies, and it runs the State-approved accreditation of gold market analysts.
 
Hong Kong will also see new gold contracts launched later this year, this time from the US-owned CME Group.
 
Aimed at giving "Asia...more tools to manage price risks and...more pricing power," according to the CME's head of metals products, Harriet Hunnable – also speaking at the China Gold Congress – the new futures contract will be physically deliverable into gold bullion.

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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