THE PRICE OF physical gold bullion fell again as London
re-opened Wednesday after the Christmas and Boxing Day holidays, dropping to
two-week lows against all major currencies in what dealers called a
"very quiet session".
London dealers returning to work caught up with a 1.4% drop for the week so
far, plus news of falling industrial output in Japan, seasonally low jewelry demand in Indian – the world's No.1 gold
buying nation – and also a new edict from the People's Bank of China,
banning all non-official gold trading exchanges in the world's No.2 gold
Silver prices also hit a 2-week low, dropping 2.1% from London's last
session, while Asian stock markets closed Wednesday lower – tracking
industrial commodities down – following a raft of weak economic data
But European equities ticked higher as Italy successfully raised more than
€10 billion in new loans.
Buyers of Rome's new 6-month bonds demanded an average annual interest rate
of 3.25%, down from 6.50% at a sale in November.
Commercial banks in the 17-nation Eurozone last night parked a record
€452 billion on deposit with the European Central Bank, beating the
previous day's record of €412bn, and more than €187bn larger than
before the ECB lent the banks €489bn in 3-year money at a cost of just
1% last week.
"The Rupee has gone down considerably," says a Mumbai-based Gold
Dealer quoted by the Economic Times of India, "and general
feeling among consumers is that gold will fall from the current [high
"That's why demand is not improving."
The Rupee has sunk to all-time lows on the foreign exchange market in 2011,
despite the strongest interest-rate hikes since the Great Depression of the
The Bombay Bullion Association said Tuesday that December's imports of gold
bullion to India – which has no domestic gold mining output –
will likely stand 50% below the level of Dec. 2010.
"Inflation is too high and buying is not very aggressive," says Prithviraj Kothari, president of the BBA, adding that
gold needs to fall back to 25,000 Rupees per 10 grams to "spur some
buying interest" after rising more than 30% and hitting new records
above Rs29,000 earlier this month.
Tuesday also saw the People's Bank of China order the closure of all Gold
Trading platforms and services outside the Shanghai Gold Exchange and
Shanghai Futures Exchange, which – as it notes – are
"approved by the State Council.
"Since 2001," the PBoC said in a press
release accompanying the edict, "China's gold market has developed very
rapidly...[as part of] the financial market system
in which it plays an important role.
"The impact of enthusiastic investors in recent years...highlights the
problem of illegal trading exchanges."
China's move comes seven months after the United States banned leveraged
commodities and gold trading by "retail" investors outside the
recognized investment exchanges such as Comex.
At the official-sector level, "The Chinese government should...further
optimize its foreign-exchange portfolio and purchase gold assets when the
gold price shows a favorable fluctuation,"
says Zhang Jianhua, director of a research bureau
affiliated with the PBOC, writing Tuesday in Beijing's Financial News,
which is also run by the central bank.
It is now almost 3 years since the PBoC last updated
its official gold bullion holdings, announcing a 75%
uplift from 2003 at 1054 tonnes.
That took China to No.5 in the world league table of national central-bank
gold holders. As a proportion of total reserves however, China stands at
No.65, holding just 1.6% of its $3.2 trillion forex
hoard in physical gold bullion.