Gold News

Gold & Silver Prices Steady at 2-Week Lows as China Threatens Rate-Hike, Looks to Grow Gold Reserves, Private Demand Leaps

Gold and Silver Prices bounced near two-week lows in London and early New York trade on Wednesday, holding below $1340 and $25.75 per ounce respectively.

Global stockmarkets steadied, but Chinese equities ended sharply lower on fresh rumors of imminent interest-rate hikes, while commodity prices capped their 3-day sell-off.

The Euro fell to a new 6-week low beneath $1.35, however, as the Irish debt crisis made fresh headlines, with the Wall Street Journal reporting talks of a €100billion bail-out, and the Irish Star tabloid accusing the governmentof being “gougers” encouraged by “their wanker-banker buddies”.

The Gold Price in Euros was volatile late Tuesday and overnight Wednesday, twice rallying fast to €32,000per kilo

As Irish debt continued to slide, Ireland's European minister Dick Roche told the BBC that “there isno reason [for] an IMF or EU-type bailout”.

The Chinese Securities Journal meantime said the People's Bank could again hike its key interest rates thisFriday to try and quell inflation. Prime minister Wen Jiabao toldstate TV that Beijing is working to cap “excessive” price rises.

Elsewhere, however, “Increasing gold reserves will helpChina increase the safety of its foreign exchange reserves,” said Peng Gang of Renmin's Economic Reform & Development Institute to the Global Times earlier, after the 21st Century Business Herald quoted an “industry insider” from Tuesday's China Mining Congress & Expo who claimed the People's Bank is looking to grow its Gold Bullion holdings further.

"The government will choose aproper time to start the plan,” reckons Peng, “but it stilldepends on the market and the global Gold Price.”

New data released this morning by global gold-market development group the World Gold Councilshowed private Chinese gold demand leaping between July and Oct. to a new quarterly record of 146 tonnes – some 14% greater than the third quarter of 2009 and 11% greater than the record set around Chinese New Year 2010.

New Year 2011 falls on Feb. 3rd.

Chinese consumers – who have bought more gold in the last two-and-a-half years than the People's Bankholds altogether in its reported reserves – accounted for 16% of Gold Bullion demand worldwide during the third quarter.

Indian households remained the No.1 buyers, however, taking one ounce in every five sold globally and growing their demand faster than China year-on-year, up by 28%.

“Considering [the sharp fall] in equities in Asia and weaker base metals, precious metals didrelatively well” this morning, says a Hong Kong dealer.

“While [Tokyo's] Tocom were sellers most of the day, Chinese were bargain hunters.”

“All of the precious metals fared much better than the base complex” in Tuesday's plunge, says today's note from Standard Bank. But “profit-taking [still] gaveway to liquidation, with the triggering of stops exacerbating the sell-off.”

Industrial metals saw “participants throwing in the towel amid a bout of mass liquidation,” Standard says.

“Copper suffered a catastrophic sell-off.”

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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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