London Gold Market Report
HE SPOT MARKET gold price
surged to $1602 per ounce Monday morning in London – a new intraday
record – while stocks and commodities fell as politicians on both sides
of the Atlantic appeared no closer to resolving their respective debt
Silver prices also jumped, up to $40.38
per ounce – 2.8% higher from Friday's close.
The gold price also set new records in
Euros and Sterling at Monday morning's London Fix.
With the Dollar price set at $1598.25
per ounce, Euro and Sterling gold prices were €1136.33 per ounce and
"The market has been very firm for
precious metals this morning. Silver led the charge and gold followed
steadily," says one bullion dealer in Hong Kong.
"Gold prices have hit fresh highs
across several currencies on macro unease, the Dollar weakening and the
escalation of European sovereign debt uncertainty," adds a research note
from Barclays Capital.
US President Obama is due to continue
discussions with leading members of Congress on Monday in an effort to find a
solution to the ongoing debt ceiling issue.
Republicans want measures to reduce the
federal deficit in return for voting to increase the $14.3 trillion borrowing
limit – which the US Treasury says it will hit on August 2.
"[The Democrats] are never willing
to be specific about the reductions in spending that they would be willing to
do," said Republican senator Jon Kyl on
Republicans have proposed a "cut,
cap and balance" plan – which would involve a constitutional
amendment requiring the US government to balance its budget each year.
Republican congressman John Boehner,
speaker of the House, described the proposal Friday as "a solid plan for
Some economists, however, fear that such
an amendment could exacerbate future recessions – since falling tax
revenues would have to be offset by spending cuts.
"It's exactly the opposite of what
intelligent fiscal policy should do," Dan Seiver,
professor of finance at San Diego State University told Reuters.
Should the balanced budget proposal not
pass Congress, a possible "Plan B" revolves around Republican
Senator Mitch McConnell's suggestion that Congress simply be allowed to vote
against raising the debt ceiling.
Obama could then veto their decision,
which would require a two-thirds majority in Congress to overturn.
"If we're unable to get an
agreement [McConnell's idea] might look pretty good a couple of weeks from
now," said Boehner.
Data published Friday revealed US
consumer confidence at its lowest level since March 2009.
Over in Europe, German chancellor Angela
Merkel said Sunday she will only attend Greek bailout talks in Brussels
"if there is a result."
Merkel reiterated Germany's desire to
see private creditors share the burden of any rescue, telling German
television that the greater the private sector contribution, "the less
likely it will be that further steps are needed."
However, European Central Bank president
Jean-Claude Trichet repeated the ECB's position on
defaulted sovereign bonds in Monday's Financial Times Deutschland.
"If a country defaults, we will no
longer be able to accept its defaulted government bonds as normal eligible collateral."
The European Banking Authority published
the results of stress tests on Friday, showing that 8 out of 90 banks had
insufficient capital to cope with given potential crises – with the
aggregate shortfall estimated at €2.5 billion.
One bank, Germany's Helaba,
pulled out of the tests last Wednesday.
The tests have been criticized for not
considering the impact of a Greek sovereign default.
"This move in gold still has
momentum, as Europe is burning to the ground," one US based trader told
Over in New York meantime figures from
the Commodities Futures Trading Commission for the week ended July 12 show a
26% rise in the net long position of so-called speculative gold futures and
options traders on the COMEX – institutional traders defined as
non-commercial. The net long figure is a measure of how bullish futures
traders are on aggregate.
Speculative long positions in gold
futures and options rose to the equivalent of 878.4 tonnes
– the highest level in ten weeks, but only 2% above the average over
the last 12 months – while speculative short positions climbed to 143.7
"We would beware of the continuing
build-up of speculative short positions," warns Marc Ground, commodities
strategist at Standard Bank.
"[These are] way above last year's
average...indicating a market that is less supportive – which could see
the gold price more vulnerable to shifts in investor sentiment."
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
your first gram of Gold free by opening an account with Bullion Vault : Click here.