Gold News

Gold Prices Slip from "Swiss Peg" Surge as China's Stockmarket Sinks on Margin Clampdown, Traders Eye Distressed Debt, Euro QE and Greek Election

GOLD PRICES edged lower from  last week's sudden mult-month highs in Asia and London on Monday, pulling back amid the worst drop in Chinese equities for 6 years as Western traders looked to Thursday's widely expected start of QE asset purchases by the European Central Bank.
 
With US markets closed for the Martin Luther King holiday, Dollar gold prices slipped $5 per ounce from Friday's finish at $1280 – the highest weekly close since August.
 
Greek government debt prices meantime fell, pushing 10-year bond yields almost one percentage point higher from a month ago at 9.20% ahead of next weekend's general election.
 
Following last week's "safe haven gold buying" when Switzerland quit its Euro peg, sparking a 30% jump in the Franc, "There may be further risk-hedging [with] gold in the coming week," says Jonathan Butler at Japanese auto-maker and conglomerate Mitsubishi, highlighting the ECB's meeting on Euro QE this Thursday.
 
Forecasting a 2015 average annual gold price of $1210 per ounce – down from $1265 last year – Butler says he expects "healthy levels of demand in Asia, particularly China, [but] the easing of import restrictions in India is likely to dampen the stockpiling of gold by the trade."
 
Indian consumers – the world's heaviest buyers until China took top spot in 2013 – have now seen gold prices rise 2.6% "in the last week," the Economic Times quotes Ketan Shroff of trade body the India Bullion & Jewellers Association
 
"This will dampen demand in the Indian market in this wedding season. Demand will return if prices fall."
 
China gold prices meantime rose sharply on Monday, adding 1.6% in Yuan terms by Monday's close in Shanghai as the main stock market today sank almost 8%, the sharpest 1-day drop since the global financial crisis of 2008.
 
Extending China's wholesale gold premium – over and above international quotes for settlement in London, heart of physical wholesale trade – to $3.65 per ounce from Friday's $2 level, today's trading volume in the Shanghai Gold Exchange's main contract was smaller by one fifth from Friday's near record.
 
Shares in top 3 stockbrokers Citic Securities (SHA:600030), Guotai Junan Securities (HKG:1788) and Haitong Securities (SHA:600837) fell by the maximum allowed daily limit of 10% after Beijing banned them and nine more firms from extending 'marging credit' to new clients.
 
Local governments in two Chinese cities have barred sales of new homes by $25 billion state-owned China Overseas Land & Investment Ltd (HKG:0688) as well as other, smaller developers – extending the block made earlier this month on the distressed Kaisa Group (HKG:1638).
 
With Kaisa apparently missing interest payments on Dollar-denominated bonds, its stock has nearly halved in the last 3 months alone.
 
Twenty per cent of all bonds currently deemed 'distressed' worldwide is owed by Russian companies, Bloomberg reports, thanks to the collapse in oil prices and Western sanctions over Ukraine and Crimea.
 
Crude oil today fell 1.8% as gold prices slipped 0.4%, dropping back below $50 per barrel of Brent after recording its first weekly gain since November according to Bloomberg data.

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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