|
Wholesale prices to buy gold fell
further from $1,600 an ounce in London on Tuesday morning, finding a floor at
$1575 as European stock markets rose for the second day running after falling
for two weeks in succession.
Commodity prices were mixed, but silver bullion also
reversed an earlier fall, bouncing off $28.05 per ounce.
US crude oil slipped back below $93 per barrel after the
international-government-backed OECD consultancy cut its forecasts for Asian
GDP and global energy demand.
Credit ratings agency Fitch today cut Japan's status to "A+"
with a negative outlook.
"With gold below $1,600, we have seen increasing demand [to buy gold] from Asia," says today's
commodities note from Barrow's colleagues at Standard Bank.
Comparing 2011's action around the same price point, "Clearly the
physical gold market has adjusted to the higher gold price,"
writes Walter de Wet, "with rallies not being sold into as last year.
"However, while the physical market is providing support on price
dips, the question remains: at what price will physical demand fall
away?"
The price for Indian households wanting to buy gold rose
1% today in Mumbai according to Sify.com, coming within 2% of the all-time
record at Rs 29,690 per 10 grams hit at the start
of this month as the rupee fell to record lows on the currency markets.
For US investors looking to buy gold,
"We believe that the significant 1532/1522 support area will be
retested in the months to come and that it will give way when this
occurs," says Commerzbank's latest technical analysis.
"A move back below 1568 keeps the bears alive looking for another
leg lower," reckons Russell Browne at Scotia Mocatta.
"We continue to eye the topside resistance between
1625-35 as being fairly strong technically," says Swiss refiner
and finance group MKS's Australian office.
"Traders need to remain cautious of negative euro headlines, which
could easily propel the yellow metal lower."
After Greek and then Spanish banks were seen suffering a run by
depositors, new data from Italy yesterday showed foreign investors
withdrawing their money from Rome's debt.
"This largely confirms what we have seen from the Target 2
[cross-border banking liability] data," says Alan Ruskin at Deutsche
Bank – "that €268bn in LTRO
borrowings (at the end of April) are making up for the net
long-term capital outflow as Italian debt increasingly becomes domestically
held."
Both Italian and Spanish government bond prices ticked higher on Tuesday,
nudging yields down to 5.6% and 6.0% respectively on 10-year debt.
US, Japanese and German bonds all slipped, as did UK government gilts
despite consumer price inflation slowing to 3.0% per year in April, according
to official data.
Right at the upper limit of the central bank's official target range,
that was the slowest pace of CPI inflation since December 2009.
The price to buy gold in
pounds reversed an early dip below £1000 per ounce – a level
first reached as the euro zone and US debt crises intensified in July 2011.
"Further monetary easing is required," says the International
Monetary Fund's latest review of the UK economy, "provided via further
quantitative easing (QE) and possibly cutting the policy rate."
UK interest rates have now been at a record low of 0.50% for 38 months
running. The last such run of static rates was the 2.0% imposed between 1931
and 1954.
"If there's one area where the Bank of England has undoubtedly
failed, it is with respect to its inflation forecasts and hence its inflation
target," writes Steve Barrow, chief currency strategist at Standard Bank
in London, noting that both the Bank of England and the European Central Bank
are conducting internal reports into their handling of the financial crisis
starting 5 years ago.
The ECB's report is due in June, with the UK report set for October.
"That policy options are limited may in fact be the main finding of
these reports," reckons Barrow.
"The use of inflation targeting is unlikely to change...We doubt
that the ECB will jettison [extraordinary measures] like SMP and LTROs
– even if its report questions their usefulness."
|