Gold News

Gold Prices Steady with EM Currencies, "Could Lose" Chinese Support for 3 Weeks on New Year Holidays

GOLD PRICES steadied $25 below yesterday's new 10-week peak at $1278 per ounce in London trade Tuesday, holding in a tight range as world equities also calmed with emerging-market currencies.
 
Turkey's central bank today raised its money-market lending rate to 9.0% from 7.75%.
 
The Lira held just above Monday's new all-time lows on the currency market.
 
India's central bank meantime surprised analysts by raising its key "repo" interest rate 25 basis points to 8.0%.
 
Consumer price inflation in the world's former No.1 gold consumer nation – where annual gold smuggling to India may total $1.1 billion on the finance ministry's estimates – was pegged in December at 9.7%.
 
"Un-surprisingly Chinese interest was piqued at the lower levels" in Tuesday's gold prices below $1255, says Swiss refiner and finance group MKS's Asian desk.
 
With Chinese wholesale interest still quiet, however, "perhaps the majority of [gold] buying has already been completed in the run up to Chinese New Year," the note suggests.
 
Premiums above international gold prices today slipped to $7 per ounce on the Shanghai Gold Exchange, down from early January's 6-month peak near $20.
 
"This indicates that the rally in gold prices," says Australia's ANZ Bank, "is resulting in a loss of interest from the Chinese."
 
Looking ahead, the Shanghai premium on gold prices "tends to remain subdued after the [New Year] holiday week has passed," says the bank's commodities team.
 
With the Year of the Horse starting this Friday, "Chinese support for the market may be absent for another three weeks," ANZ concludes.
 
Meantime in Singapore, gold trading hub between India and China, "We need additional capacity, so we have to take further space," Bloomberg News today quotes Brinks Inc.'s general manager Baskaran Narayanan.
 
"There's a surge in demand for precious metals in Asia, and one can see the focus and movement from the west to the east."
 
China's giant ICBC bank – the world's biggest bank, currently acquiring a 60% stake in fellow London bullion market members Standard Bank's commodities division – today said its customers in busted "wealth product" Credit Equals Gold No.1 can sell their investment for the initial value, an about-turn from last week's promise of "no bail out".
 
China's so-called "shadow banking" industry of similar high-yield products targeting wealthy individuals is valued at some $1.2 trillion, according to the Financial Times.
 
Meantime in Japan – where the country's 3rd largest gold retailer Sumitomo sold its business to the No.1, Tanaka, this week, citing low consumer sales – the government is planning to seize about ¥50 billion per year ($0.5bn) in "dormant" bank accounts, and use the cash "for welfare and education projects".

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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