Gold’s London AM fix this morning
was USD 1,669.00, GBP 1,072.69, and EUR 1,282.17 per ounce.
Yesterday's AM fix was USD 1,675.00, GBP
1,076.55, and EUR 1,294.94 per ounce.
Cross Currency Table - Bloomberg
Gold started out lower in Asia this
morning as the euro faltered on news that European finance ministers rejected
an offer by Greece's private creditors to help restructure its debts, but
gains on Tokyo futures exchanges and an increase of demand in India cushioned
Investors are waiting on the outcome of a
2 day Federal Reserve meeting which ends on Wednesday. Here they are
following any signs that interest rates will remain low, as that could put
pressure on the U.S. dollar.
The Tokyo Commodity Exchange, December,
gold contracts climbed as high as 4,167 yen/gram, its biggest gain since
mid-December. The gains initially propelled cash gold even though trading was
slow during the Lunar New Year break.
Japan has been notably absent in the gold
market in recent years. This may be changing as concerns about the Japanese
economy and continuing debasement of the yen may be leading to Japanese
diversification into gold.
The scale of domestic savings in Japan
This would be a new and potentially
extremely important source of demand in the gold market which could help
contribute to much higher gold prices.
The EU will freeze assets in Europe of
the Iranian Central Bank as well as of 8 other entities and ban trade in
gold, precious metals, diamonds and petrochemical products from Iran. The
Iranian Foreign Ministry in a statement called the decision
“aggressive” and said it will have “negative consequences”
in Europe, including higher oil prices. The elevation of tension with Iran
will continue to give gold a safe haven status for investors.
The World Gold Council published its yearly report on
gold’s performance for 2011.
They report, “During 2011, the US
dollar price of gold rose by 9% ending the year at US$1,531/oz based on the London PM fix, marking the 11th
consecutive year of price increases.1 During the first part of January 2012,
the price of gold continued its upward trend above the US$1,600/oz level.”
Central bank gold purchases are expected
to have hit another record in 2011, while demand for gold-backed
exchange-traded products fell to less than half of that seen in 2010 last
year, according to a report from the World Gold Council on Monday.
The WGC, an industry-backed group, said
in November it expected central banks to add some 450 tonnes
of gold to their existing reserves in 2011, driven mainly by purchases from
emerging economies that are seeking alternative investments to the U.S.
Source: World Gold Council - Reuters graphic
"Central bank net-buying is poised
to have a record year, and many of these purchases happened during Q3 and Q4.
Additionally, investment activity remained healthy as market participants
continued to access the market whether through bars and coins or other
vehicles," the council said in a report.
"In fact, gold-backed ETFs,
collectively, added 75 tonnes of gold between
September and December alone (out of 153 tonnes
during the full year)," it said.
Demand for gold-backed ETFs in 2010, when
the reach of the euro zone debt crisis first became apparent with the
bailouts of Greece and Ireland, reached 367.7 tonnes,
according to WGC data.
Rising equity market volatility and a
desire among safety-conscious investors for cash in the run-up to the end of
the year knocked the gold price back from September's record highs to
December's closing levels around $1,564.00. Since then, gold has risen by
nearly 8 percent to trade around $1,670 an ounce in London at 1455 GMT.
"Our analysis shows that there have
only been six previous instances in which the price of gold has fallen by
more than 10 percent over the past decade and once the price has stabilised to a certain (typically new) level, it resumed
its upward trajectory," the World Gold Council said, but did not include
any price forecasts for 2012.
"Moreover, the price pullback
experienced this last September was less pronounced than the pullback gold
experienced during 2008. Even then, gold rose to finish the year with
positive returns. Beyond the day-today market movements, the underlying gold
price trajectory is based on its long-term supply and demand dynamics which
remain robust," the council said.
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