Gold News

Gold Prices Test $1308 Again as China Bank Run Hits Headlines, Bundesbank Says Euro QE "Not Out of Question"

GOLD PRICES fell back to yesterday's 5-week low at $1308 per ounce lunchtime Wednesday in London, dropping hard from a tight overnight range as Western stock markets rose.
 
Gold prices in China – now the world's No.1 consumer as well as mining nation – ended the day slightly higher, but only trimmed their discount to international prices to $3 per ounce.
 
Eastern Chinese city Yancheng meantime saw a third day of "anxious"  depositor withdrawals from the small Jiangsu Sheyang Rural Commercial Bank, with 1,000 customers cueing since Monday according to the South China Morning Post.
 
"Rumours about our solvency triggered the chaos," the paper quotes an official at the bank, which reportedly put cash on show behind teller windows to reassure depositors but without success.
 
"The situation is serious and we will probably ask the police to find out the origin of the rumours."
 
China's so-called " gold trade financing" poses a threat to prices, according to analysis by US investment bank Goldman Sachs, as loans collateralized by physical bullion are unwound quickly amid the country's tightening credit crunch. 
 
Here in London on Wednesday, wholesale  silver bullion bars again tracked gold prices lower, dropping beneath $20 per ounce – a 6-week low when first breached on Monday.
 
Trading more than 6% beneath last week's 6-month high, gold prices hit a new 4-week low for UK investors at £790.
 
Euro gold prices held steadier, however, as the single currency dropped near 2-week lows to the Dollar after Germany's Bundesbank president Wiedmann – a key member of the Eurozone central bank – said a QE money-printing program to avoid deflation " is not out of the question."
 
Struggling to hit its 2.0% target for consumer price inflation, the Bank of Japan may increase its aggressive QE program this spring, a government advisor is quoted by Bloomberg.
 
US rate-rises are " state, not date, contingent," said St.Louis Federal Reserve president James Bullard in a speech Tuesday night, stressing the need for stronger economic data to qualify last week's comments from new Fed chair Janet Yellen that zero rates – now in place for more than 5 years – could end 6 months after the current QE tapering is complete.
 
"The [precious metals] markets are quiet, physical demand is fairly non existent and business is pretty scarce at these levels," says London broker Marex Spectron in a note.
 
Dropping to $1307, "We look for a basing effort here" says new technical analysis of gold prices from Swiss bank and London market maket Credit Suisse, "[followed by] an attempt to turn higher again."

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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