Gold News

Gold Prices Gain 1%, Hit 16-Month Euro High as Draghi Signals QE to Fight Deflation, China & India Inflows Rise

GOLD PRICES rose to touch $1200 per ounce Monday afternoon in London, gaining 1.0% from last week's finish for US investors and hitting the highest level since September 2013 against the falling Euro currency.
 
Western stock markets fell sharply while US bond prices rose, pushing 10-year yields down to December's 18-month low at 2.07%.
 
Trading on China's key gold exchange had earlier been quiet, but premiums to London gold prices held solid in Shanghai at $4 per ounce.
 
With the European Central Bank now widely expected to start outright QE asset purchases right around this month's snap election in Greece – in which polls say the anti-Euro Syriza party has a slim lead – the Euro fell through fresh 9-year lows below $1.20.
 
Gold priced in Euros broke above €1000 per ounce.
 
"Buying resumed when the Chinese returned," says one Asian trading desk, "pushing spot gold and silver to the day's highs.
 
"Seasonally China has good demand between now and their Lunar new year which is in Feb, so we expect premiums to remain robust."
 
Net gold imports through Hong Kong to mainland China reached 99 tonnes in November, the the city's Census & Statistics Department said last week.
 
Although holding year-to-date totals 30% below 2013's record, that was the strongest gold imports since February.
 
"Clearly," says a note from German bank Commerzbank, "[Chinese] consumers are taking advantage of the low prices to buy up more gold."
 
"Retailers have no doubt also been replenishing their stocks ahead of the New Year festival in mid-February."
 
India's gold imports also rose at the end of 2014, new estimates said Monday, with total inflows to the world's No.1 consumer nation rising 8.4% from 2013 despite the previous government's anti-gold import curbs – not abolished until December.
 
"Demand is now quite dull" however, the Business Standard quotes Prithviraj Kothari, head of major dealer Riddhi Siddhi Bullion in Mumbai, "and we don't see any significant improvement in demand for a couple of months.
 
"Expectation is that in the budget, government may cut import duty on gold, which will bring down gold price in India."
 
Alongside lower gold imports through Hong Kong to China in 2014, Western coin buyers also cut their demand notes the Wall Street Journal, comparing full-year data from major government mints.
 
Australia's Perth Mint said its 2014 gold coin sales fell 28%, while the US Mint sold 39% fewer American Eagles.
 
"All in all," says a note from UK investment managers Barclays Capital, "investors still demonstrate a preference to hold paper over hard assets."
 
"Indeed, the absence of basing patterns [in crude oil prices] compels us to expect further downside towards the $45/$50 area for [US contracts]."
 
European Brent crude oil fell to new 5-year lows near $54 per barrel on Monday. 
 
Warning that deflation could take hold in the Eurozone – now with 19 member states after Lithuania acceded on New Year's Day – "The risk that we do not fulfill our mandate of price stability," wrote European Central Bank chief Mario Draghi in German newspaper Handelsblatt at the weekend, "is higher than six months ago."
 
With German consumer price inflation today giving its lowest reading since the global financial crash of end-2008, the ECB was already making technical preparations "to change the scope, pace and composition" of its monetary stimulus "at the start of 2015," Draghi wrote.

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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