Gold Bullion Flows to Asian Jump But No.1 ETF Sheds Metal as China Growth Hits 5-Year Low, S&P Extends Rally

Tuesday, 10/21/2014 14:12

GOLD BULLION rose to 6-week highs above $1250 per ounce in London's wholesale market Tuesday as European equities shrugged off poor data from China and S&P futures pointed higher on Wall Street.

Gaining 5.8% from this month's new 2014 lows, the price of gold bullion contrasts with the 4.5% drop in global stock markets on the MSCI World Index.

But gold bullion holdings to back the giant SPDR Gold Trust however fell Monday at the fastest pace so far in 2014, losing 10 tonnes to a new 6-year low of 752 tonnes.

Such changes in the SPDR Gold Trust (NYSEArca:GLD) are reported to show a 2-day lag – the standard settlement terms for wholesale gold bullion in London, where the GLD vaults with commercial bank and market-maker HSBC.

"Gold's performance overnight was all the more encouraging," says Swiss refining and finance group MKS, "as the S&P [index of US stocks] closed back above 1900 and market jitters seems to have calmed for the time being."

New GDP data from China – the world's No.1 gold miner, importer and consumer nation – today beat analyst forecasts but showed a slowdown in economic growth to 7.2% per year in the third quarter.

The slowest pace since the Western world's financial crisis of early 2009, that pace is also below Beijing's long-standing 7.5% target.

Separate data today showed growth in China's retail sales, as well as new urban investment, easing in September to the slowest pace in 5 years.

Japan's shares fell 2% by the close, but European equities extended their rally from this month's near-10% drop.

Crude oil extended its bounce and US bond yields ticked higher while silver rose sharply.

Adding 1.5% to hit near-1 week highs at $17.66 per ounce, silver had earlier lagged gold once again, taking the Gold/Silver Ratio to a new 5-year high above 71.4 ounces of silver per 1 ounce of gold.

Trading volume in the Shanghai Gold Exchange's main contract rose towards the last one month's average. But Chinese Yuan prices failed to rise as quickly as world prices in London, cutting the Shanghai premium almost to zero from the 1-month average above $3 per ounce.

Swiss gold exports to China and Hong Kong were 36 tonnes last month, new trade data from the world's No.1 refining nation showed Tuesday, while India imported 58 tonnes of September's 173-tonne total – the largest flow in 7 months.

"This ties in well," says a note from Swiss bank and London market-maker UBS, "with the pick-up in physical demand across the key [Asian demand] centres."

"There is an improvement in gold demand on Dhanteras," The Times of India quotes one Delhi jeweler, "as gold is quoted at a lower level compared to last year."