Gold News

Gold Prices End 2-Month Rise, Chinese Buyers "Ready to Take Advantage" as India "Reviews" 10% Import Duty

GOLD PRICES held in a tight $6 range around last week's close at $1295 per ounce in London on Monday morning, heading for the first monthly drop of 2013 as world stock markets also held flat for the day overall.
 
Silver meantime spiked and fell back from $20.00, while commodities ticked down with major government bond prices.
 
Ten-year US Treasury yields edged higher to 2.74%, some 0.9 percentage points above their level at end-March 2013.
 
"We got a little ahead of ourselves on the bearish view back in January," says a note from Swiss bank and bullion market-maker Credit Suisse's precious metals analysts, noting the gold price's 17% rally from end-2013 to mid-March.
 
Revising Credit Suisse's end-2014 target higher to $1200 from $990 per ounce however, "We do not believe the rationale for lower gold prices ahead has changed," the note goes on, pointing to US Fed tapering and then "tightening" of interest rates.
 
"We do not think demand growth from Asian physical markets will be sufficient to offset supply and western investor disinterest," concludes Credit Suisse, which in January 2013 declared ' The Beginning of the End of an Era' for rising gold prices, then at $1660.
 
"Despite this being a seasonally quiet time for Chinese gold demand," counters Mitsubishi analyst Jonathan Butler, "the trade is ever ready to take advantage of low prices.
 
"We look for the re-emergence of physical demand to keep gold reasonably well supported at these levels."
 
Shanghai prices for gold bullion bars today slipped again, down for the 8th time in 11 sessions even as the Chinese Yuan has slipped nearly 1% against the US Dollar.
 
But China's discount to benchmark London prices – most usually a premium for shipping and thanks to local demand – edged back to $3 per ounce from last week's multi-year records.
 
Economic growth in China – now the world's No.1 gold buyer and No.2 end-user of silver – should be maintained at a "reasonable pace", said prime minister Li Keqiang at the weekend, a comment taken by some analysts to signal possible economic stimulus ahead.
 
"It's difficult for the market to solely move on talk about stimulus with no concrete plan," Reuters quotes Seoul analyst Kim Yong-goo at Samsung Securities.
 
Eurozone stock markets were unchanged on the day after new data showed Eurozone consumer prices rising just 0.5% annually this month, the lowest rate of inflation across the 18-nation union since the deep recession of 2009.
 
"We believe [the ECB] are growing more concerned about growth and inflation," says Kathy Lien at New York's BK Asset Management, pointing to Thursday's monthly decision from the European Central Bank.
 
The issue for deciding any monetary stimulus, Lien says, is interpreting "the recent slowdown as a temporary pullback or a deeper problem."
 
The Euro rose on the currency markets, pushing gold prices for Eurozone investors down 0.4% from Friday's 7-week closing low to reach €938 per ounce.
 
Meantime in former No.1 gold buying nation India, where elections start next week, finance minister P.Chidambaram today told a news conference he's consulting with the Reserve Bank on easing the country's 10% import duty.
 
Accusing opposition BJP leader Narendra Modi of "deep character flaws", Chidambaram did not apparently discuss the 80:20 import rule for gold, widely seen as causing last year's collapse in India's legal inflows.

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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