Example of the 'BullionVault Weekly Update'

BullionVault Weekly Update
Monday, 11 January 2016

In the markets this morning... For up-to-the-minute live spot gold and silver prices use the BullionVault chart

Golden (New) Years
from Adrian Ash
Head of Research, BullionVault

LET'S PUT last week's mind-warp pavilion for the kings of oblivion to one side for a moment.

Because until it sticks, this 4% rise in gold prices just means gold is doing what it usually does at New Year.

Eight times in the last decade, in fact. And to date, this January gold jump maps pretty much exactly what happened at the start of 2015, too.

Silver is staying true to form too...lagging gold as the New Year starts.

That's pushed the Gold/Silver Ratio of relative prices up towards multi-year highs. One ounce of gold equates to more than 78 ounces of silver at current prices.

Bloomberg reckons this must mean a pullback is coming...with silver outperforming gold in the months to come.

But what if "safe haven" gold retains its New Year's appeal, while silver continues to lag?

Silver, after all, tends to jump hardest and fastest when the threat of inflation jumps.

And no-one says strong inflation is coming.

Whereas gold is often seen as also offering "deflation" protection...a hedge against the bankruptcies and debt destruction which falling consumer prices can create.

Surely that is why gold has jumped...again...on the noise coming from China's stock market.

Because just as in late 2008, the threat of a widespread market crash makes rare, indestructible gold highly appealing to money managers. Most especially because...unlike any other natural resource...gold is also next-to-useless for anything else than storing value, too.

Let's not get too excited. The Chinese authorities haven't entirely lost control of the situation. Not yet. Even if they have helped push the interest rate on offshore Yuan up to 38% for overnight deposits.

Deflation, of course, is hard to see clearly through the smoke and confusion. Because for every Switzerland...stuck with falling prices no matter how many Francs it prints and dumps to try and devalue the currency...there is a Sri Lanka desperate to shore up its currency on the FX market.

Against Sweden, in short, check out South Africa.

Globally, however, food prices fell by almost one-fifth in 2015, according to the United Nations.

Now a glut of everything from corn to soy beans threatens to push prices down further.

That's bad news, in the main, for producer countries. Saudi Arabia, for instance, today felt the need to warn speculators that it will defend the Riyal's peg to the US Dollar come what may.

Fans of history can guess what comes next.

Internal to the precious metals market, meantime, the slowdown in wholesale dealing of late 2015...down to the lowest turnover in 10 years...is sending mixed signals from the big bullion banks and trading houses.

Japan's Mitsui is about to quit helping make the market in physical bullion. Yet Bank of America Merrill Lynch has stepped in to share that role...taking the total number of market makers to 14...while the Chinese-owned ICBC Standard Bank is clearly planning big things by buying its own London vault.

Rumour says ICBC Standard has also applied to become a clearing member, and I can only guess that it must surely be going to join the daily benchmarking process...formerly known as the Fix...now with 12 market makers in gold, and 6 for silver.

What does ICBC...the largest bank in the world's second or first largest gold consumer market...think it knows about the future of precious metals?

Ahead of the fun-loving, cheerful and clever Chinese New Year of the Monkey starting on Monday 8 February, it would certainly seem to know that London remains the world's central gold-trading hub.

For now.

Adrian Ash
Head of Research, BullionVault

Key data and market events, times in Greenwich Mean Time (CET-1, EST+5):
  • Last week US jobs hiring blew past forecasts for December; both China + US manufacturing sector now shrinking, Eurozone expansion gets quicker; UK household borrowing rising fastest since financial crisis; Eurozone consumer-price inflation slows to 0.2% per year; US vehicle sales missed forecast in December, construction spending shrank in November; Germany factory orders grow strongly again, but retail sales weak; Spain election results still a mess...
  • Weekend US consumer credit grew more slowly than forecast before Christmas; China consumer prices rose 0.5% last month from November, second-strongest pace of 2015, but factory prices continued 5.9% annual drop...
  • Already today Swiss retail sales sank 3.1% year-on-year in November in real terms; Eurozone investor confidence sinks to 12-month low (Sentix survey)...
  • Later on Monday Canada new home building + business outlook survey; US labor market conditions index; US Fed 'neutral' Lockhart gives a speech (no longer a voting member)...
  • Tonight Japan trade deficit + bank lending...
  • Tuesday UK retail sales, manufacturing output, GDP estimate (NIESR); US Fed vice-chair Fischer gives a speech, then 'hawk' Lacker (not a 2016 voter), plus Bank of Japan boss Kuroda...
  • Wednesday China import + export data for December; Eurozone industrial production; US crude oil stockpiles for last week, plus government's monthly budget deficit statement; Bank of England chief Carney gives a speech...
  • Thursday Japan machinery + machine-tool orders, plus corporate goods' price deflation; Australia jobs data; Bank of England decision on UK interest rates + QE; Canada new house prices; US weekly jobless benefit claims data; US Fed 'dove' Bullard gives a speech (voting member in 2016)...
  • Friday China foreign-direct investment flows from December; France government budget; Eurozone trade balance data; US retail sales, producer price inflation + industrial production from December, plus consumer sentiment (Reuters/Michigan)...
  • Weekend UK real-estate asking prices (Rightmove) for January; China house-price index for December...
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