London Gold Market Report
From Ben Traynor
THE U.S. DOLLAR gold price recovered some of its losses from
the previous day Friday, edging higher to $1666 an ounce by the end of the
morning in London, while most stock markets also edged higher ahead of US
nonfarm payrolls data due out 08.30 Washington, DC time.
A day earlier, gold dropped 1% during Thursday's US session, in what
one analyst describes as "a remarkable display of schizophrenic
A few hours later there was "little buying on the physical
side" in Friday's Asian session according to one Hong Kong dealer quoted
by newswire Reuters.
"There's some buying from mainland China...but I think gold is a
bit tired after it failed to break $1700 an ounce."
European stock markets edged higher this morning, with exceptions in
Italy and Spain. Spain's IBEX 35 index extended recent losses and was down
1.4% on the day by lunchtime today, the first day of trading after a ban on
short selling dating from last July came to an end yesterday. Spanish stocks
have now erased their gains from January.
The S&P 500 by contrast has seen its best start to a year since
1997, rising 5.2% last month.
"Earnings are strong, the economies around the world are
bottoming and valuations are attractive," reckons Paul Zemsky, head of asset allocation at ING Investment
Management in New York.
BNP Paribas today became the fifth big bank to follow Goldman Sachs
and cut its 2013
gold price forecast by up to $100 per
The French bank's analysts now believe gold will average $1790 per
ounce this year.
Credit Suisse meantime published a note today entitled 'Gold: The
Beginning of the End of an Era', arguing that the 2011 gold price peak could
prove to have been the high "in this cycle" as the financial crisis
grows less acute.
Like gold, silver also edged higher this morning, ticking above $31.40
an ounce, while other commodities were broadly flat.
China's manufacturing sector meantime continued to expand in January,
though at a slower rate than the month before, according to official
purchasing managers' index data published by Beijing Friday.
China's official manufacturing PMI fell to 50.4 last month, down from
50.6 in December, with a figure above 50 indicating sector expansion.
HSBC's manufacturing PMI by contrast rose to 52.3, up from 51.9 a
month earlier, implying an accelerated growth rate. The HSBC PMI is more
heavily weighted towards small and medium enterprises than the official PMI,
which places greater emphasis on the views of purchasing managers at larger
"Overall, I will put more weight on today's official PMI, largely
because the current recovery is still rather narrowly based," says
Li-Gang Liu, chief China economist at ANZ.
"We believe the state sector tends to benefit from this round
recovery much more than the SME sector, a sector that tends to dominate the
HSBC sample. The HSBC PMI also has a pattern of pro-cyclicality. When the
markets are optimistic, the HSBC often becomes more so, and vice versa."
Over in Europe, Germany's manufacturing PMI rose from 46.0 in December
to 49.8 last month, while for the Eurozone as a whole the manufacturing PMI
rose from 46.1 to 47.9.
"Providing there are no further setbacks to the region's debt
crisis, these data add to the expectation that the Eurozone is on course to
return to growth by mid-2013," says Chris Williamson, chief economist at
Markit, which produces the European PMI data.
In the UK meantime, manufacturing PMI fell last month to 50.8, down
from 51.2 a month earlier. Similar PMI data for the US are released later
The US Senate Thursday approved legislation to extend the federal debt
ceiling until May 19. The legislation now needs to be signed into law by
The US Mint meantime reported a record monthly volume of silver
American Eagle bullion coin sales for January. Just under
7.5 million ounces of the silver coins which are produced specifically
for investment purposes were sold last month. Sales of
gold American Eagle coins were their highest since July 2010 at 150,000
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 economics. Ben can be found on Google+
(c) BullionVault 2013
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