Gold News

Gold Price Bounces on NYSE Trading Halt After Fresh China Stock Slump Sees Shanghai Gold Trade at Discount

GOLD PRICES bounced hard from 4-month lows in late London trade Wednesday as the latest rout in Chinese equities – plus fresh proposals from Euro-bankrupt Athens to Greece's creditors – was followed by a halt to share trading on the New York Stock Exchange due to "technical issues".
 
With the S&P 500 index already down 1.3% on the day, "This is the worst I've seen since the Nasdaq blackout" of August 2013, one analyst told CNBC.
 
Dollar gold prices meantime bounced to $1163 per ounce, recovering $15 of the $20 dropped to new 4-month lows so far this week.
 
Trading on Shanghai's state-approved gold exchange had earlier jumped, hitting the heaviest volume since early February in China's main domestic contract, as both the Shanghai and Hong Kong stock markets sank by more than 5%.
 
Gold prices still fell in Yuan terms however, hitting the lowest daily close at the SGE since December, with the equivalent Dollar price reaching a $1.20 per ounce discount to comparable quotes in London on Wednesday morning.
 
"Government counter measures to arrest the [stockmarket] slump have also failed to work so far," notes Chinese-owned investment bank ICBC Standard Bank's London office.
 
"Commodity markets are likely to remain volatile," ICBC Standard Bank adds, "but with the Chinese government looking likely to overcompensate, an aggressive rally may well be next."
 
"Perhaps gold has not been a safe-haven," says analysis from Australia's Macquarie investment bank, "because investors do not need a safe-haven" despite the Greek and now Chinese crises.
 
China share prices remain 15% higher for 2015 so far, Macquarie explains, and "global equity markets haven't shown anywhere near as much volatility."
 
"So far," agrees bullion bank HSBC's analyst James Steel, "China equity losses have not resulted in more investor funds being channeled into gold.
 
But "the combination of little 'safehaven' demand [plus] weak physical emerging-market purchases is clearly bearish for bullion."
 
China's equity market has seen 52 million new brokerage accounts opened so far in 2015.
 
Calling the last month's 35% crash an "irrational drop", regulators today banned any investor holding more than 5% of a listed stock from selling any of their shares for the next 6 months, extending an increasingly desperate raft of measures aimed at stemming the meltdown.
 
"The ban also applies to senior company executives and board members," reports the Financial Times from Shanghai, "regardless of the size of their stakes.
 
"The regulator said it would 'deal sternly' with violators."
 
Greek prime minister Alexis Tsipras meantime spoke to the European Parliament in Brussels on Wednesday, urging support and unity amongst the Eurozone as details of Athens latest and perhaps final proposals to its creditor partner states were revealed.
 
Asking for a new 3-year bail out program, Greece's "radical left" Syriza government says it will implement tax and pension reforms starting next week, provided that talks are at least scheduled to discuss reducing Athens outstanding debts.
 
Wednesday's recovery in the Euro, rising near last week's closing value on the FX market, kept the gold price for single currency investors nailed to €1050 per ounce – a 16-month high when first reached in January, around which it has now traded very tightly since the start of June.

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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