Gold News

Gold Bullion Falls, Silver "Loses Momentum" Ahead of a "Deluge" of Central Bank Speeches

The price of Gold Bullion fell Tuesday lunchtime in London, unwinding an earlier rise against all currencies bar the US Dollar and Japanese Yen, which continued yesterday's rise.

European stock markets slipped, US crude oil fell back below $82 per barrel, and Silver Prices dropped below $24 per ounce for the second time this week.

Latest quarterly earnings showed Bank of America losing $7.7 billion between July and Oct., while Goldman Sachs' profits fell but still beat analyst forecasts.

"A deluge of monetary policy makers give their opinions on the economy this afternoon," notes one London Gold Dealer in a note, as the European Central Bank hosts a conference in Frankfurt, with speeches from ECB chief Jean-Claude Trichet, Bundesbank president Axel Weber, and new US Fed voting member Janet Yellen.

Bank of England governor Mervyn King speaks during a tour of the West Midlands manufacturing districts – a trip which "may well decide" the BoE's next round of quantitative easing, according to the Wall Street Journal.

Five bank presidents from the Federal Reserve – as well as chairman Ben Bernanke – are then scheduled to speak in the US.

"No country...can devalue its way to prosperity, to [be] competitive," said US Treasury secretary Tim Geithner to the Commonwealth Club of California in Palo Alto on Monday. "It is not a viable, feasible strategy and we will not engage in it.

"It is not going to happen in this country."

Since Geithner took office in Jan. 2009, the US Dollar has lost 10% of its value against the world's other leading currencies, and dropped more than one-third of its value against Gold Bullion.

In London trading this morning, Gold re-touched last week's 1-month high against the Euro currency, and came within £2.80 of June's record-high for UK investors, touching £868 per ounce.

US, German and UK government bonds fell, meantime, nudging the yield offered by 10-year British gilts back above 3.00%.

"We need to give careful consideration to the matter of increasing Gold Bullion volumes in our foreign reserves," said South Korean central bank governor Kim Choong-soo to a parliamentary committee in Seoul meantime.

South Korea currently holds just 0.2% of its $290 billion reserves in Gold Bullion, notes the Financial Times. The world average is nearer 10%.

Short-term, "Gold is likely to continue the rally before the Federal Reserve meeting in early November," reckons Zhu Yilin of Jingyi Futures in Shanghai, speaking to Reuters this morning.

But "Unless the Fed announces quantitative easing to a huge extent, gold will retrace. It's all about anticipation. Once the result is out, it's time to close positions." 

After poor US manufacturing data dented the Dollar – and buoyed gold – late Monday, "[More] disappointing numbers might raise investors' expectations of further [monetary] accommodation and consequently send precious metal prices higher," says Walter de Wet at Standard Bank today.

But "we remain cautious on gold post-5 November. The risk remains that the Fed could disappoint in the size of QE...Seasonal jewelry demand should [also] fall away in November" after the Hindu festival of Diwali is celebrated in India, the world's  No.1 consumer market for physical gold.

Silver Bullion's "steep ascent is [also] expected to lose upside momentum," writes technical analyst Axel Rudolph at Commerzbank today.

Despite Silver Prices looking "long-term bullish" after breaking both a downtrend begun in 2008 and the Sept. 1980 high of $24.25 per ounce, "Seasonality points towards a consolidation," says Rudolph.

"Five and 25-year seasonality shows October to be a month in which the Silver Price tends to consolidate."

Crunching numbers from the latest US futures' market data, the VM Group here in London notes that speculative traders cut their bullish betting on Silver Prices at the fastest pace since mid-July last week.

"Investors in silver ETFs continued to pile in, however, pushing total investment up to a fresh high."

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Adrian Ash

Adrian Ash, BullionVault Gold News

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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