Gold News

Gold Price Recovers 1% Weekly Loss as Deutsche Bank Quits London Fix

GOLD PRICES jumped back to last week's closing level Friday lunchtime in London, erasing 1.0% losses to trade above $1248 per ounce after weaker-than-expected US house-building data.
 
World stock markets meantime held flat overall, 
 
Deutsche Bank today said it is leaving the silver and gold Fixings in London, citing "the significant scaling back of our commodities business."
 
A market-making member of the London bullion market, "We remain fully committed to our precious metals business," Deutsche added in a brief statement.
 
Used as a major trading point by miners and other large users of the London market, heart of the world's bullion trade, the gold and silver Fixes give a single price-point in Dollars, Sterling and Euros, and act as global reference benchmarks.
 
President of Deutsche Bank's domestic regulator, BaFin, Dr. Elke König last night said that accusations of manipulation in currency and precious metals reference rates "weigh heavily" on public trust. Because unlike the discredited Libor and Euribor interest-rate benchmarks, the FX and bullion fixes "are based on actual transactions in liquid markets and not on estimates of the banks."
 
Today's PM London Fix came in at $1250 per ounce, some $1.20 above where the major bullion banks' average mid-price quote in the spot market stood as the Fixing began at 15:00 GMT.
 
Midday Friday's London silver Fix had been set at $20.01 per ounce, some 4 cents below spot at the start of process but 1.1% up for the week.
 
On quitting the Gold Fix, Deutsche Bank will leave four banks – London-based Barclays and HSBC (which vaults for the giant SPDR Gold Trust, ticker: GLD), Canada-HQed ScotiaBank, and French investment bank Societe Generale – to meet and identify that twice-daily clearing price for client orders between them.
 
Scotia and HSBC will be left on the Silver Fixing.
 
Sources quoted by Reuters, the Wall Street Journal and Bloomberg however say Deutsche is seeking to sell its seat on both the London Gold Fixing and London Silver Fixing limited companies to a fellow member of the London Bullion Market Association.
 
The other London market-makers not already on the Gold Fix are Swiss investment banks Credit Suisse and UBS, the US-based banks Goldmans Sachs, J.P.Morgan and Merrill Lynch, and Japanese corporate conglomerate Mitsui.
 
The world's largest bank by market cap' and assets, China's ICBC – which is expected to finalize the purchase of South African Standard Bank's commodities unit, another London bullion dealer, in 2014 – became an Ordinary Member of the LBMA in December 2011.
 
Chinese gold premiums on Friday, over and above London spot quotes, pushed higher for the first time this week, rising back to $14.50 from $13 per ounce on Thursday.
 
Ahead of the busy Chinese New Year, "It is unlikely," reckons a 2014 outlook from the commodities team at SocGen in London, "that Chinese demand will match the level of 2013, let alone expand at its typical growth rate" due to heavy stockpiling by wholesalers on last year's price crash.
 
Reports this week said the People's Bank of China has granted gold bullion import licenses to two foreign banks for the first time, naming HSBC and Australian member of the LBMA, ANZ.
 
The Dollar was meantime little moved on the release of Friday's US housing data, having already risen to 1-week highs vs. the Euro.
 
New building starts and permits for December both came in below 1 million annualized.
 
Last month was the coldest US December since 2009 says Bloomberg, quoting Planalytics, with snowfall 21% above average.
 
Sterling earlier jumped 1.5c from its lowest level since Christmas on news that UK retail spending jumped 6.1% year-on-year in December, the fastest pace since 2004.
 
That capped gold prices for UK investors at £760 per ounce, some 0.4% higher on the week.

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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