Gold News

Gold Prices Touch 6-Week High But China Premium Falls, South African Mines Hit by Strikes

GOLD PRICES rose in quiet trade Monday lunchtime in London, reaching $1257 after touching the best level in 6 weeks at $1260 per ounce at the start of China dealing.
 
With the US closed for Martin Luther Kind Day, Asian stock markets slipped, while European shares held flat with commodities.
 
Gold mining companies in South Africa – the highest cost of the world's major producer regions – joined platinum miners in receiving strike notices from the AMCU union over pay and conditions.
 
Formerly the world's largest gold producer each year, South Africa is now in 6th position, with China at No.1 since 2007.
 
"Good buying interest out of Asia ahead of the Lunar New Year," says Germany-based refinery group Heraeus, "together with physical demand we witnessed from European investors should continue to lend support to" gold prices.
 
"Strong demand from China continues to offer support on the downside," agrees a note from London market-maker Barclays.
 
"But in our view, the strength of this buying is unlikely to last much beyond the Lunar New Year."
 
Chinese premiums, over and above international gold prices for London settlement, today retreated to $10.50 per ounce at the close of Shanghai trade, the lowest level so far in 2014.
 
Ahead of the Chinese New Year – the peak season for consumer demand – Shanghai premiums for wholesale bullion peaked a fortnight ago at $18 per ounce.
 
That was the highest Chinese gold premium since world gold prices first crashed to $1200 in late-June 2013.
 
Alongside GDP data showing 7.7% growth in the world's second-largest economy for 2013, the National Bureau of Statistics today said jewelry sales rose 26% by Yuan value last year to a new record total equal to $48.9 billion.
 
The value of new homes sold in China, it added, rose 27% to equal some $1.1 trillion.
 
"The price action in gold was telling in Friday's session," says a note from ANZ Bank – which together with HSBC is said to have received gold-import licenses from the Beijing authorities.
 
"[ Gold prices] have now failed to break and hold the $1255 level at least five times in the last week."
 
The People's Bank today made short-term loans to major banks in a bid to ease tight liquidity and rising interest rates ahead of the Chinese New Year.
 
China's central bank said on its website that smaller regional banks can now also access its Standing Lending Facility for 7-day and 14-day loans.
 
Weaker Eurozone bonds meantime rose in price again Monday, pushing 10-year Portuguese yields down 0.8 percentage points from 1 month ago according to Bloomberg data.
 
Poland's fourth-largest mobile phone provider, P4, is set to raise the equivalent of $1.2 billion from credit markets says Bloomberg, as interest rates on so-called "junk bonds" in Europe fall to record lows.
 
Back in bullion dealing, silver tracked gold prices but touched only a 1-week high above $20.40 per ounce.
 
Platinum led precious metals as a whole, reaching its highest level in four months at $1466 per ounce following the South African strike news.

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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