London Gold Market Report
from Ben Traynor
BullionVault
Wednesday 23 January 2013, 07:30 EST
GOLD continued to hover near one-month highs above $1690 an ounce Wednesday morning, where it has spent most of this week, with dealers in India and China citing a slowdown in physical bullion demand.
Silver climbed above $32.30 an ounce, a one-month high, as stocks and commodities were broadly flat and US Treasuries gained.
“A clear break [for gold] of $1694 would take our view to bullish,” says the latest technical analysis from bullion bank Scotia Mocatta, which adds that “support is at $1666.”
“Typically we should see a lot of buying from China around this time of the year, but we are not,” one Singapore-based dealer told newswire Reuters this morning.
“They may have already stocked up for the holiday demand.”
China celebrates its Lunar New Year on February 10, a festival typically associated with a rise in gold buying.
Over in India, traditionally the world’s biggest gold buying nation, “the market remains quiet with the wedding season drawing to a close,” says a note from Societe Generale, which adds that India’s decision to raise gold import duties will have an impact on demand for small gold bars.
“Dealers [however] are expecting a revival in interest on the back of an appreciating Rupee.”
Moves to reduce the level of bullion imports will promote confidence in the Rupee, agrees HSBC Global Asset Management, which predicts increased investment flows into the country.
This year and next could see record average gold prices, according to a survey of analysts by Reuters, but the possibility of tighter monetary policy from central banks could mean the bull market reaches a “plateau”, respondents add.
The average silver price is expected to be up in 2013 compared to last year, but down on the 2011 average of $35.25 an ounce, according to the survey.
Buying gold is a good hedge in case “the system goes down”, according to Swiss investor Marc Faber, publisher of the ‘Gloom, Boom & Doom’ report.
“In the worst case scenario, in the systemic failure that I expect, it would still have some value,” Faber told an audience in Finland yesterday.
Faber also responded to comments from US economist Robert Shiller, who was also at the event and queried Faber’s recommendation to buy gold.
“You keep your US Dollars and I’ll keep my gold,” said Faber.
“We’ll see which one goes to zero first.”
In the UK, the Bank of England’s Monetary Policy Committee members voted 8-1 against extending quantitative easing at its meeting earlier this month, minutes from the meeting published this morning show.
One member, David Miles, voted to increase QE from the current £375 billion to £400 billion.
“Be in no doubt that we are ready to provide more stimulus if it is needed,” the Bank’s governor Mervyn King said in a speech in Belfast last night.
“Relying on generalized monetary stimulus alone, however, is not a panacea.”
King argued that Britain’s government should implement supply-side reform, though he did not give specifics, while also arguing that the Bank should not abandon inflation targeting after King leaves in the summer.
King’s appointed replacement, current Bank of Canada governor Mark Carney, suggested last month that a policy of nominal GDP targeting might be more appropriate, whereby the central bank aims to use policy to achieve a given nominal value of economic output.
UK unemployment meantime held steady last month at 4.8%, according to the claimant count measure.
Elsewhere in the UK, prime minister David Cameron promised Britain a referendum on whether or not the country should remain in the European Union, with a date set for 2017.
Across the English Channel, the finance ministers of eleven EU member states, including France, Germany, Italy and Spain, agreed Tuesday to look at introducing a so-called ‘Tobin tax’ on financial transactions, a move the British government opposes.
Banks in Vietnam have been told by the central bank they must settle all gold bullion loans to their customers by June 30, even though many loans are for a duration of five years or more.
“Banks may have to ask their gold borrowers to convert their loan into Vietnamese dong, or earmark money [for the bank] to buy back the gold,” one bank’s CEO says.
Many gold owners in Vietnam have had difficulty selling their bullion since the number of dealers authorized to trade was reduced after a central bank decree came into effect last week.
Japan’s biggest bullion retailer Tanaka Kikinzoku Kogyo meantime reported that it bought more gold from people than it sold last year for the eighth year running.
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Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics. Ben writes and presents BullionVault’s weekly gold market summary on YouTube and can be found on Google+
(c) BullionVault 2013
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