Gold News

Gold Jumps 2nd Day Running 3pm in London as Iran 'Seizes US Cargo Ship', Gold/Silver Ratio Down & 'Set to Fall' Further

GOLD jumped at the London 3pm benchmarking formerly known as 'the Fix' for a second day running Tuesday afternoon as news broke of troops from Iran firing on and capturing a US cargo ship in the Strait of Hormuz.
 
Starting at 15:00, a surge in the average 'spot' quote from major bullion banks and dealers forced the LBMA Gold Price auction's suggested price up to $1209 per ounce – the highest London benchmark since 3rd March – before supply and demand came within the accepted 20,000 ounce imbalance.
 
Spot prices then raced another $4 higher to touch 3-week highs at $1213 per ounce by 15:11, at which time Arab news service Al Arabiya's English language site reported that Iran is "holding" a US cargo ship with 34 sailors at its southern port of Bandar Abbas.
 
Al Arabiya tweeted in Arabic that Iranian forces had fired on the vessel. The Pentagon told the Reuters news agency that, while no US ship was involved, US warplanes and a US destroyer are responding to a distress call in the region from Marshall Island-flagged ship the Maersk Tigris, aparently with no US citizens on board.
 
US crude oil contracts also spiked, but failed to touch mid-April's six-month high.
 
Western stock markets extended an earlier fall to lose 1.8% in Europe.
 
Silver prices added another 1.4% to Monday afternoon's near-4% jump, trading back above $16.60 per ounce for the first time since 10th April.
 
"Silver had been underperforming gold for most of April," TheBullionDesk earlier quoted strategist Edel Tully at Swiss investment and bullion bank UBS, "with the gold:silver ratio rising from the low 70s towards the highs around 75."
 
But since mid-month, the Gold/Silver ratio – a simple measure of gold's price-per-ounce divided by silver's, the better to view their relative strength – has "remained capped" says Tully, a fact which "is actually quite encouraging and strengthens our conviction that it will eventually outperform gold further down the road."
 
The Gold/Silver Ratio in 2015 "could fall back further," agreed a note from Lusanne's Diapason Commodities last week, saying that "on a fundamental basis, silver may outperform gold on the acceleration of global growth [because] silver is more cyclical due to its more extensive industrial use.
 
"As the risk-off environment continues to fade, the underperformance of the most defensive precious metals will continue."
 
Tuesday's jump in precious metals prices – coming as that news first broke of Iran either "escorting", "forcing" or "seizing" a cargo ship – put the Gold/Silver Ratio down below 73 on spot prices,
 
Tehran's Fars news agency – a quasi-government mouthpiece in Iran, according to the BBC – said the vessel was seized for "trespassing on Iran's territorial waters". Foreign reports said the Maersk Tigris, sailing in the accepted shipping lane through the Strait of Hormuz, was ordered to sail deeper into Iranian waters and then complied after having a shot across her bow.

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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