Gold News

Gold Price Hits Lowest LBMA Price in April as Greek Reforms Delayed, Emergency ECB Loans Extended

GOLD FELL to the lowest Dollar price in a week lows and hit 1-month lows against a rising British Pound mid-afternoon Wednesday in London, as Western stock markets slipped amid news of fresh delays to a resolution of the Greek debt crisis.
 
Athens will not submit fresh reform proposals to its Eurozone partners – needed to unlock €7 billion of bail-out loans – at Friday's summit of finance ministers as expected. But "the clock is ticking," Euro working group head Thomas Wieser assured Austria's ORF news broadcaster late Tuesday.
 
"Over the course of May [an agreement] must finally be reached", some 5 years after the Eurozone first made 'bail-out' loans to Athens.
 
As the single currency Euro fell on the FX market Wednesday, the LBMA Gold Price auction saw heavy offers to sell bullion at the 3pm opening price of $1197 per ounce, forcing a price cuts to $1189.25 – the lowest benchmark price since 1st April – before demand rose 4-fold to better balance that supply.
 
Silver extended the gold price drop, hitting 5-week lows against the Dollar at $15.70 per ounce.
 
US and UK government bond prices both fell, nudging interest rates higher, but German and French yields pushed lower to new record territory as Greece's stock market dropped to 3-year lows and Athens' market borrowing costs rose towards 14%.
 
German daily Handelsblatt today said the European Central Bank has raised the ceiling on its Emergency Liquidity Assistance to Greek banks, extending ELA by another €1.5 billion to €75.5bn – a move unreported by the ECB itself, and not mentioned by board member Benoît Cœuré in an interview with Greece's Kathimerini today.
 
"The Greek banking system currently receives around €110 billion of central bank liquidity," Cœuré tells the paper, " more than double the level of last December and 61% of Greek GDP, the highest level of any Euro area country."
 
According to the ECB's website, ELA is extended to " a solvent financial institution facing temporary liquidity problems."
 
Cash deposits at Greek banks have fallen to 10-year lows, shrinking by 15% in the five months to March.
 
Further ahead, reckons US investment bank Morgan Stanley, "Negative rates" on Eurozone government bonds "will continue to drive flow into US credit, supporting both the house view of ongoing Dollar strength and our unchanged generally subdued gold price outlook."
 
But for now, ICBC Standard Bank adds, "Gold ETF holdings continue to rise, with the spectre of a Greek exit from the Eurozone gaining the upper hand for the moment compared to the timing of higher US interest rates."
 
The giant SPDR Gold Trust (NYSEArca:GLD) yesterday added another 3 tonnes of gold to back its shares, expanding for the third time in a week to reach 742 tonnes after losing 5% from February's  6-month high of 773 tonnes.

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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