Gold Remains Unchanged Eurozone Banking "Stress Test" Beats Forecasts

GOLD PRICES remained almost unchanged from last week’s close on Monday morning in London trading around $1231 an ounce, as European stock market, government bonds and the Euro rose after the European banks stress test results were published.

US equities gained too as crude oil lost ground again slipping to $80.2 a barrel.

The European Central Bank released the results of stress testing the Euro-zone’s 130 biggest banks, which were slightly better than expected. Among the 25 banks that fell short, the biggest problems were found in Italy, Cyprus and Greece.

“There’s some relief this morning that there were no Spanish banks in the test that failed. As for Italy, that was already priced in,” said market economist at Rabobank Emile Cardon after the announcement and seven years after the outbreak of the financial crisis. The ECB’s Vice President Vitor Constancio said the result could encourage banks to lend.

With the safe-haven demand curbed, gold remained flat on Monday without much recovery. “All these, and accounting for the relatively stronger greenback for the past month, should continue to inject downside risk for bullion,” told Reuters Barnabas Gan from OCBC Bank.

Gold prices were up against analysts forecasts as gold also benefited from GDP growth, according to the World Gold Council’s latest investment commentary, released today. The market development organisation does not expect US interest rates to rise notably in the short term. And even if they do, they would not have “the devastating effect for gold many experts predict… as the gold market is structurally robust to support its long-term growth.”

China’s net gold imports via Hong Kong jumped to six-month highs in September, above 68 tonnes from 27 tonnes in August, showed latest data from the Hong Kong Census and Statistics Department.

At the same time, Indian consumers demand remained strong in the past weeks. On Dhanteras day -- celebrated last week and considered to be most auspicious day to buy gold in the Diwali Festival -- sales of gold and silver coins in India surged by 40% year-on-year, said Vipin Raina, the Marketing President of refinery and mining company MMTC-PAMP.

Meanwhile, bullish position bets by gold speculators on the Comex increased last week to their highest level since last August (25% to 334 tonnes), as the latest data published by the CFTC on Friday showed.

Silver prices tracked gold on Monday to around last Friday’s close at 17.21 dollars an ounce.

Silver imports to China picked up in September to 106 tonnes from 48 tonnes in August, with a total in 2014 so far of 1067 tonnes, said Commodities Strategist Walter de Wet at Standard Bank in a report published last Friday.  “If China’s silver imports don’t show another [month on month] pick up in October, it would support our view that China has enough silver inventory and that silver’s price bias lies to the downside,” added de Wet.

In the meantime, the German business climate IFO index fell for a sixth month to 103.2 from 104.7 in September. Despite the lowest level since December 2012, the stronger than expected manufacturing PMI last week lessened the market concerns about the weakness of Europe’s biggest economy. The IFO report is considered an early indicator of current conditions and business expectations in Germany.

In Ukraine’s parliamentary elections, pro-Western parties were set for election victory. According to early results on Monday morning, President Petro Poroshenko’s bloc and Prime Minister Arseniy Yatseniuk’s party secured 22% of the votes each. The President thanked voters for backing a “democratic, reformist pro-Ukrainian and pro-European majority.”

Regarding upcoming economic data, the main focus this week will be the US Federal Reserve's meeting on Wednesday deciding on interest rates and the end of the QE.