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The WHOLESALE MARKET gold price reached new 5-week highs as Asian trade ended and London
opened on Tuesday, while global stock markets and commodity prices also rose after stronger-than-expected growth data from China.
The world's second-largest economy, China reported annual growth of 8.9% for
the end of 2011 – the weakest level since mid-2009 but stronger than
analysts forecast and almost 5 times the pace of US growth at last count.
The Shanghai Composite stock index jumped 4.2%. Copper led base metal prices
by rising 2.6%.
Silver bullion re-touched last week's 2-month high above $30.50 per ounce,
despite news of a sharp hike in Indian import duty which also affects gold.
The gold price peaked on Tuesday mornng at $1667
per ounce, more than 9.4% above the 5-month low touched in late December.
US crude oil contracts jumped back to $100 per barrel after Saudi oil
minister Ali al-Naimi said the Opec-cartel
member is now targeting that level – "a new line in the sand"
substantially above the previous "fair price" of $75 according to
Standard Bank today.
"Gold price action is becoming increasingly indifferent to physical
trade and far more susceptible to broader market headwinds," says a note
from Japanese conglomerate Mitsui's London team today.
"Everything is rising because of China," says one commodities
analyst in Frankfurt to Bloomberg. "It's general market sentiment."
"Simply put," reckons China economist Ting Lu at Bank of
America/Merrill Lynch in Hong Kong, "Beijing will continue its policy
easing which was started in mid-October, though we should not expect a
big-bang stimulus."
Beijing cut the required reserve ratio which banks must keep back from
lending for the first time in three years last November, easing it back
half-a-percentage point from a record 21.5%.
Analysts now expect a further two percentage-point cut in 2012, reports
Reuters, "with many banking on one in the run-up to next week's Lunar
New Year holiday."
"In terms of calendar year 2011, [gold demand from] India was
ahead," says Philip Newman, research director at Thomson Reuters GFMS,
presenting the consultancy's latest global data in London today but it does
seem as though China, in terms of our data for the first half [of 2012], may
just tip it."
GFMS now forecasts a gold price peak of $2000 per ounce, sometime in 2012.
China's domestic gold mining output – the world's No.1, and currently
subject to an export ban – rose sharply in December to end 2011 some
19% higher than 2010 at 731 tonnes, according to the National Bureau of
Statistics today.
Across in India – the world's hungriest gold consumer – the
government today raised import duties on silver to 6% by value, and raised
the duty on gold from 300 Rupees per 10 grams to a value tax of 2%.
That doubles the effective tax rate on gold, first deregulated as India moved
away from a command economy in the early 1990s.
The gold price on the Multi Commodity Exchange (MCX) today rose almost 1% to
INR27,760 per 10 grams, while shares in leading jewelry chains shed some 3%.
Over the last 12 months, the plunge in the Indian Rupee's forex
value has made the gold price rise over 10% higher than it otherwise would.
Annual imports to India – which has no domestic gold mining output
– declined by 9% from 2010's record level, according to the Bombay
Bullion Association.
Meantime in Europe on Tuesday, several governments including Greece and also
the cross-border Stability Fund – downgraded from its
"triple-A" credit rating on Monday by Standard & Poor's –
raised almost €11 billion in short-term bills, and at lower interest
rates than last time of asking.
The Euro rallied 1.5¢ from last week's 17-month low near $1.26.
The gold price rose faster, however, nudging cost of gold to Eurozone buyers
above €1300 for only the second time since 8th December.
"Spot gold in Euros is about to touch the November peak at
€1316.48 [per ounce]," reckons Axel Rudolph, technical analyst at
Commerzbank.
"Should this level be surpassed a swift acceleration higher towards last
year's all-time high at €1359 should be seen."
New data released Tuesday showed the pace of consumer-price inflation slowing
last month across the European Union – the largest single export market
for China.
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