London Gold Market Report
U.S.DOLLAR gold bullion
prices on the spot market dropped sharply to $1708 an ounce Monday morning
– a 2.2% fall from Friday's close – while stocks and commodities
also fell and the US Dollar gained following Japan's intervention aimed at
weakening the Yen.
Gold bullion prices then rallied as the
morning went on, hitting $1725 per ounce by lunchtime in London.
"The huge spike in the Dollar is
pressuring gold prices," says Ong Yi Ling,
analyst at Phillip Futures in Singapore.
"But so long as gold stays above
$1,700, the sentiment should remain pretty bullish."
Silver bullion fell to $34.18 per ounce
– 3.3% down on Friday's close – remaining around that level for
the rest of the morning.
On the currency markets, the US Dollar
gained 5% against the Yen immediately following Tokyo's action. By Monday
lunchtime, however, the Dollar had slipped back by 2.1%.
In Europe meantime, "bold decisions
are needed from the G20 leaders meeting in Cannes this week to get the global
economy back on track," says Angel Gurria,
secretary general of the Organisation for Economic
Co-operation and Development.
"In most countries we see some very
worrying political trends," notes Laurence Parisot
of French business lobby Medef.
policies benefit no one," says British prime minister David Cameron,
writing in the Financial Times.
"We have to push for a more
balanced world economy, where countries like the UK do better at saving and
investing and restoring their competitiveness."
M4 money supply in the UK fell 1.7% in
September, figures released by the bank of England on Monday show. Lending to
the real economy, according to the Bank's measure, fell by £6.4
billion, compared to an average monthly decrease of £3.9 billion over
the previous six months.
Lending to individuals, by contrast,
rose by £1 billion last month, with consumer credit growing £0.6
billion – to show an increased annual growth rate of 2.5%.
The Bank announced this morning that it
will no longer release these data monthly, and will instead move to quarterly
On the bond markets meantime, yields on
Italian 10-Year Treasury bonds hit 6.15% this morning – briefly showing
a spread of over four percentage points compared to German bunds.
Italy had to offer yields
of over 6% when it auctioned €7.9 billion of longer-dated bonds on
Friday – the highest rate it has paid as a Eurozone member.
Elsewhere in Europe, plans to avoid
triggering credit default swaps in the event of a Greek default have raised
questions over whether banks using CDS – which act as a form of bond
insurance – to hedge their sovereign exposure are now less protected
than they thought, news agency Reuters reports.
CDS pay out if there is a "credit
event", usually taken to include a default. However, it remains unclear
whether a deal on Greek debt – such as the 50% haircut for private
creditors agreed last week – would be viewed as voluntary, and if so
whether it would then constitute a credit event.
"People talk about Greek CDS
triggering being destabilizing, when it's really the opposite," Reuters
quotes one global credit trading head at a major European bank.
"If there is a 50% haircut and it's
voluntary, then my worry is all my sovereign CDS protection in Europe is
useless, and my net exposure is much higher."
British bank Barclays cut its exposure
to Eurozone sovereign debt by 31% during the third quarter of this year,
according to results published Monday.
Over in New York, the net long position
of bullish minus bearish gold futures and options contracts held by
noncommercial – so-called 'speculative' – traders on the Comex exchange jumped 5.2% in the week ended 25 October.
"Given that this week's improvement
merely erases the deterioration of the previous week, the speculative market
still appears to be cautious about gold's short-term prospects," warns
Marc Ground, commodities strategist at Standard Bank.
Over the same period, the gross tonnage
of gold bullion held to back shares in the SPDR Gold Trust (ticker GLD)
– the world's largest gold ETF – rose by 16 tonnes,
though the GLD has seen a small outflow of less than one tonne
since last Tuesday.
In China meantime, JPMorgan Chase Bank
(China) has received approval to become a member of the Shanghai Gold
Writing in the London Bullion Market
Association's 'Alchemist' newsletter in 2009, Tim Wilson, JPMorgan's managing
director and head of Asia marketing of commodities, asked whether an Asia
initiative should be "an agenda item on every LBMA committee".
"The number of debates and articles
about transforming the LBMA into the International BMA are too numerous to
recount, but discussion has rarely been translated into action," he
"We as Market Makers and Members
should be embracing the opportunity to cement our position as the pre-eminent
gold trading platform, to expand and promote the benefits associated with the
highly accredited, reliable and international LBMA Good Delivery List."