Gold News

Gold Trading in Shanghai's International Contract Beats Domestic Volume for Second Day as Equities Gain, US Rate Rise 'Will Be Late & Slow'

GOLD TRADING held Dollar prices above $1213 per ounce Tuesday afternoon in London, unchanged after an earlier slip as world stock markets rose with the US currency.
 
China's main stock index in Shanghai earlier closed 2.5% up on the day despite brokers warning of default on domestically-issued debt in the world's second largest economy.
 
Former restaurant chain Cloud Live – which switched to the internet business last August – today  defaulted on $40 million of bonds, according to press reports.
 
With China's financial regulator punishing 6 brokerages Friday for lax credit standards after stock brokers opened a million new trading accounts in one week last month, that represents the first default on China-issued bonds, according to separate firms, since solar-panel manufacturer Chaori was restructured and bondholders paid in full following its 2014 default.
 
Setting a new lifetime record on Friday, gold trading volume in Shanghai's international 'free trade zone' contract today exceeded the formerly dominant domestic exchange's contract for the second session running.
 
That compares with equaling an average 6% of the domestic contract's daily turnover during the first 6 months of the new international bourse, launched last September to enable trading with Yuan currency held offshore.
 
Dealing and storage fees were cut to zero for foreign institutions using the new international bourse last December, and the current rules on needing to transfer bullion to the main bourse are set to be eased according to reports.
 
Gold prices on the iAu9999 contract today closed above China's main domestic contract for the first time since Thursday, but still offered a $1.60 per ounce discount to the world's benchmark of London settlement.
 
"Strong equities and marginally stronger USD weigh[ed] on precious this morning," says a gold trading note from Standard Bank's London team, "but the geopolitical risks, plus expectations that US hikes are likely to be delayed, should help support dips."
 
With Athens due to repay €450 million to bail-out lender the International Monetary Fund on Wednesday, IMF chief Christine Lagarde apparently "stressed" at a meeting in Washington on Sunday that "the Fund is willing to show utmost flexibility" according to the Greek finance ministry today.
 
Pakistan's defense minister meantime told the parliament in Karachi on Monday that Saudi Arabia has asked the nuclear power to join its air attacks on Houthi rebels in neighboring Yemen.
 
Iran today asked Pakistan today to help catch the militant killers of 8 border guards, press reports said.
 
As for US interest rates, "I continue to believe that it would be a mistake to raise...in 2015," said 'dovish' policymaker Narayana Kocherlakota of the Minneapolis Federal Reserve in a speech today, claiming that the central bank can "be both late and slow in reducing the level of monetary accommodation."
 
Last week's "weak US nonfarm payrolls send warning signals to the Fed that a rate hike is completely inappropriate at this point of time," agreed brokerage Phillip Futures in Singapore on Monday.
 
"A continued loose monetary environment is supportive of gold and we may expect to see a short-term rally in gold prices."
 
"Not until the Fed embarks on a programme of monetary tightening," says a note from analysts at former leading bullion bank Deutsche Bank, "do we expect to see a sustained move lower in the gold price."

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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