Gold News

Spot Gold Rises in 'Volatile' Dollars After First LBMA Gold Price, China Forecast to 'Buy 50%' of Annual Output by 2020

SPOT GOLD in Dollars neared 2-week highs above $1175 Friday lunchtime in London, rising a little over $3 per ounce from the first LBMA Gold Price, set by auction of market demand and supply through six participant banks.
 
London spot-gold market makers UBS and Goldman Sachs joined the former London Gold Fix's four remaining members – Barclays, HSBC, Scotia Mocatta and SocGen. Five of those banks showed interest in today's auction.
 
The Dollar then fell hard on the FX market, with the Euro regaining one of the record six cents it spiked – and then lost – following Wednesday's 'dovish' statement from US central bank, the Federal Reserve.
 
That knocked spot gold quotes for Euro traders down  to €1090 per ounce – some 1.2% down on the week.
 
Spot gold in British Pounds also retreated, but held near 1-month highs above £790 per ounce.
 
"Some light selling in gold in early Asian trading," says a note from Swiss refining and finance group MKS's traders, predicting "a tight range leading into the weekend.
 
"However the volatile USD will be the influencing factor."
 
Shanghai trading volumes eased back from Thursday's 1-week high. But premiums above wholesale quotes for London-delivered bars rose to $6.90 per ounce by the close.
 
Up more than $1 on the day, that was twice the last 6 months' average Shanghai premium, incentivizing importers to buy and ship gold from London.
 
"China's share of the global gold market is likely to rise sharply," reckons a new report from London bullion market-maker Barclays today, claiming that the world's second-largest economy "is one of the few countries where demand is likely to continue expanding" to 2020.
 
Over the next five years, Barclays' analyst Suki Cooper believes, China "could be consuming almost half the world's gold output" – a level of total world supply its households currently achieve when combined with demand from consumers in India, the world's historic No.1 gold-buying nation.
 
"However," Barclays goes on, "we do not expect this trend to be hugely positive for prices...[because] demand growth in many other regions is flat to down."
 
With regards to gold pricing, Reuters said last month that the Shanghai Gold Exchange plans to launch a benchmark 'fix' – identified from exchange-traded volumes and prices – sometime later this year.
 
Here in London, Friday morning saw the first "run" of the new LBMA Gold Price, the electronically-recorded replacement to the century-old Gold Fix, which ended yesterday.
 
The 10.30am price was discovered after 5 rounds of "trying" according to data freely published by administrator IBA, with the price lowered – to find a better balance of supply and demand – from an opening at $1173 to $1171.75 per ounce.
 
At that final price, demand to buy was just below 70% of both Thursday's AM Fix and the last week's AM Fix average.
 
The quantity of gold offered was 95% of Thursday morning's level, and 78% of the Fix's final week's AM average.

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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