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Gold is trading at USD 1,592.0, EUR 1,223.30, GBP
1,028.00, CHF 1,491.0, JPY 124,067 and AUD 1,600.50 per ounce.
Gold’s London AM fix this morning was USD
1,593.00, GBP 1,028.34, and EUR 1,222.94 per ounce.
Friday's AM fix was USD 1,589.50, GBP 1,022.84 and EUR
1,218.94 per ounce.
Cross Currency Rates
Gold has fallen marginally in most currencies,
extending last week's loss, which was the biggest in nearly three months.
Gold’s weakness continues despite negative economic news such as
Fitch's warning regarding downgrading France and other countries and
geopolitical risk after the death of North Korea’s Kim Jong-il.
Fitch warned it may downgrade France and six other euro
zone nations as it believes a comprehensive solution to the region's debt
crisis is "technically and politically beyond reach."
Asian shares fell and South Korea’s KOSPI closed
3.4% lower after being as much as 5% down after news of the death of Kim Jong-il created fears of regional instability.
 
Gold $/oz Daily
The gold market barely reacted to Jong-il's
death. The death could contribute to further short term weakness and dollar
strength but geopolitical instability in Asia should lead to further safe
haven demand for gold.
A Reuters poll of hedge fund
managers showed how sentiment towards gold remains subdued and negative.
Hedge fund managers are negative on gold’s price prospects in the near
term with many saying gold will fall below $1,500 an ounce over the next
three months.
However, even hedge fund managers are positive on gold
in the medium term and believe that gold is likely to retest September's
all-time highs – possibly by late 2012.
The industry itself as represented by government mints,
refineries, brokers, bullion banks remains more bullish than hedge fund
managers. Much of the industry would have an expertise and an insight into
the precious metals market that your average hedge fund manager would not.
Managed money in gold futures and options cut bullish
bets for the second consecutive week, the latest data from the U.S. Commodity
Futures Trading Commission showed. This is another contrarian signal that
gold is close to bottoming.
Holdings of SPDR Gold Trust, the world's largest
gold-backed exchange-traded fund, remained unchanged from a day earlier at a
one-month low of 1,279.98 metric tons, down 15.43 metric tons, or 1.2% from a
week earlier.
While investors cut 13.3 metric tons of gold from their
ETP holdings yesterday, the most since Aug. 24, assets are less than 1% below
the record set December 14 showing that buyers of the gold ETF are
‘stickier’, less speculative and more passive than many had
assumed.
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XAU-GBP Exchange Rate
Options traders remain bullish. The most widely held
option gives owners the right to buy gold at $2,000/oz
by March. The eight biggest holdings are all call options at 13% or more
above prices today.
ETF gold holdings remain at record highs and continuing
robust demand for physical bullion and an almost complete lack of selling by
bullion owners in western markets on the recent sell off again shows that the
sell off was driven primarily by speculators and
momentum driven funds and by liquidity starved western banks.
UBS acknowledged the possibility of official sector
gold selling – saying that “larger moves were also likely taking
place behind the scenes, judging from the considerable market chatter about
official liquidation.”
There is also the likelihood that European banks
desperate to get hold of dollars were lending or selling gold which was lent
to them by “national central banks, or by gold exchange traded
funds”, according to the FT.
While demand in India remains subdued, bullion demand
in Europe remains brisk and there are signs that Chinese demand has picked up
and China is buying the dip.
"In the very short-term, gold below $1,600 is very
attractive within China," UBS noted today.
"This can be seen from the sharp increases in
Shanghai Gold Exchange volumes last week. Combined SGE turnover last week was
the strongest since mid-March and SGE premiums versus London hit $21,
premiums not seen since mid-October” said UBS’ Edel Tully.
Central banks are also almost certainly buying gold at
these levels as they have been doing in recent months on corrections.
Absolutely nothing has changed regarding the
fundamentals driving the gold bull market despite this most recent sell off.
Indeed, the sell off was
expected - although the scale of the selloff has surprised some.
The fundamental factors driving the market in 2012
remain the same – the Eurozone and global debt crisis, negative real
interest rates and the debasement of fiat currencies being some of the
primary drivers.
Rehypothecation and the serious risks that
a massive period of deleveraging poses to the global financial and economic
system is likely to be a very important factor in 2012 which will lead to heightened
volatility but is another positive for gold prices in the long term.
Due to the continuation of the fundamental factors
driving the market in 2011, most serious analysts of the gold market have not
revised down their outlook for prices in 2012.
XAU-EUR Exchange Rate
Bullion banks remain positive on gold for 2012 with
major banks predicting an average gold price of between 13% and 28% above
today’s spot at $1,595/oz. It will be interesting to see if these
forecasts get as much international media coverage as the poll of 20 hedge
fund managers has.
UBS have reiterated their bullish outlook for gold and
believe gold will average $2,050/oz in 2012. This
is 28% above today’s spot price of $1595/oz.
Goldman Sachs said overnight that gold will average
$1,810/oz in 2012 – which is 13% above
today’s spot price.
Barclays Capital have said
this morning that gold will average $2,000/oz in
2012 – which is 25% above today’s spot price.
Gold will move higher due to “structural pillars
of support” in an environment of negative real interest rates and
rising inflationary pressures, as well as continued central bank buying.
Given the risks posed to the Eurozone and indeed the
UK, gold priced in sterling and euros should experience similar gains - if
not more.
The ECB’s Draghi’s
warning regarding a Eurozone break up, currency devaluations and the risk of
a “big inflation” is a reminder that the price of gold should be
considered not solely in dollar terms but also in other currencies
–especially were the European single currency to become less single.
OTHER NEWS
(Bloomberg) -- Central Banks May Buy 400-600 Tons of Gold in 2012, Goldman
Says
Central banks may buy between 400 metric tons and 600 tons of gold next year,
Goldman Sachs Group Inc. said today in an e-mailed report. The metal will
average $1,810 an ounce in 2012, and bullion equities may continue to lag the
gold price, the bank said.
(Bloomberg) -- Gold Retains ‘Pillars of
Support’ in Longer Term, Barclays Says
Gold will average $2,000 an ounce next year and retains “structural
pillars of support” in an environment of negative real interest rates
and rising inflationary pressures, as well as continued central bank buying,
Barclays Capital said in an e-mailed note. Bullion will average $1,875 an
ounce in the fourth quarter of this year, Barclays Capital said.
(Bloomberg) -- Physical Gold Demand Growth to Slow in
China Next Year, UBS Says
Physical
gold demand in China will “remain a big part of the overall gold story
next year,” even as the year-on-year growth rate may be slower than in
previous years, UBS AG said.
China’s gold imports may have nearly doubled to
almost 500 metric tons this year, UBS said in an e-mailed report. “In
tonnage terms, that kind of increase could be repeated in 2012.”
(Bloomberg) -- Gold to avg. $1,810/ oz
in 2012 on low U.S. rates, risk sentiment, Goldman says in note
Availability
of ETFs, easy access to physical gold, poor delivery performance of gold
equities have seen them lag gold price; trend will
continue said Goldman.
(Reuters) -- Australia's Newcrest Mining
<NCM.AX>, the world's third-largest gold
producer, on Monday cut its full-year output guidance by around 6 percent,
citing disruptions and lower grade ore at mines in Papua New Guinea and
Australia.
For breaking news and commentary on financial markets
and gold, follow us on Twitter.
SILVER
Silver is trading at $29.27/oz,
€22.45/oz and £18.85/oz
PLATINUM GROUP METALS
Platinum is trading at $1,414.75/oz, palladium at
$624.50/oz and rhodium at $1,425oz.
NEWS
(Bloomberg)
Gold Declines as European Debt Crisis, Kim’s
Death Strengthen the Dollar
(Reuters)
Gold weakens after Fitch downgrade warning
(MarketWatch)
Gold slips after struggle to stay atop $1,600
(Reuters)
Gold prices will fall below $1,500/oz; May reach record high in 2012
(The Telegraph)
Eurozone Crisis: Foreign Office Plans Evacuation of
UK Expats in EU
(Emirates 24/7)
Dubai sees gold buying as prices at
‘bargain’
(Financial Times)
Draghi warns on eurozone
break-up
COMMENTARY
(MarketWatch)
The East Is Gold? - Asia is Buying
(Barron’s)
The Silver Rush at MF Global
(Jesse's Café Américain)
Trustee to Seize and Liquidate Even the Stored
Customer Gold and Silver Bullion From MF Global
(KingWorld News)
Jim Rickards - This Will
Send the Price of Gold to the Moon
(ZeroHedge)
Saxo Bank's 10 "Outrageous Predictions" For
"2012: The Perfect Storm"
(ZeroHedge)
Things That Make You Go Hmmm - Such As Europe's
"Comprehensive Solution"
(The Telegraph)
Video: Gold bullion could 'easily' hit $2,000
Mark
O’Byrne
Goldcore
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