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Gold’s London AM fix this morning was USD
1,563.00, EUR 1,213.79 and GBP 972.62 per ounce.
Friday's AM fix was USD 1,580.75, EUR 1,221.69 and GBP
980.98 per ounce.
Gold fell $12.70 to close at $1,581/oz
in New York on Friday. Gold has fallen again today and has now erased the
gains for the year. Gold edged up in early Asian trading as bargain hunters
lifted prices from four month lows, but gains were capped and prices
gradually fell and falls continued in European trading.
Cross Currency Table – (Bloomberg)
Support is at $1,550/oz and a
close below that level could see gold test strong support at $1,523/oz and $1,533/oz – the
lows in December and September 2011 respectively.
Greece looks certain to leave the single currency
– something that was denied could ever happen by policy makers, central
bankers etc. for many months. A Greek exit from the eurozone
would damage confidence in the single currency bloc but not necessarily be
‘fatal’, Irish central bank chief and ECB policymaker Patrick Honohan said over the weekend.
“Things can happen that are not necessarily
imagined in the treaties... it is not necessarily fatal but it is not
attractive”, Honohan said.
For Greeks who have left their life savings in euros in
Greek banks it might prove fatal to their finances as capital controls are
suddenly introduced and their savings are forcibly converted to the Greek
drachma overnight. It is estimated that the drachma could quickly devalue by
between 20% and 50%.
Spanish 10-year bond yields have surged to over 6.29%
leading to concerns of contagion which is leading to sell offs in most
markets including gold. However, gold's recent correlation with risk assets
will again be short term and buyers should again focus on the long term and
gold's proven long term diversification, wealth preservation and safe haven
qualities.
While gold is now negative year to date in dollar
terms, it remains 0.7% higher in euro terms. This shows that recent gold
weakness is primarily due to the recent bout of dollar strength.
Gold in USD – Daily (1 Year)
Money managers in gold futures and options have cut
their net long positions by 20%, CFTC data showed Friday. The plunge means
that bullish gold bets are at their lowest level since December 2008 (92,498
contracts), as speculators aggressively unwound their bullish bets in the
precious metal after recent price falls.
Gold in Euros – Daily (1 Year)
Bullish silver bets on a silver rally tumbled 32% to
7,159, the biggest decline since late December. This is bullish from a
contrarian perspective.
In the physical market, jewellery
makers and speculators took advantage of last week's drop in prices according
to Reuters and there are reports of physical buying interest and indeed
“tight supplies” in the physical market.
Gold prices dropped 3.7% last week and silver fell 5.1%
to $28.89/oz. The smart money, especially in Asia, is again accumulating on
the dip.
Demand for jewellery and
bullion in India has dipped in recent weeks but should resume on this dip
– especially with inflation in India still very high at 7.23%.
Also of interest in India is the fact that investment
demand has remained robust and gold ETF holdings in India are soon to reach
the $2 billion mark.
Gold in GBP – Daily (1 Year)
Morgan Stanley has said in a report that gold’s
bull market isn’t over despite the recent price falls.
Morgan Stanley remains bullish on gold as it says that
the ECB will take steps to shore up bank balance sheets, U.S. real interest
rates are still negative, investors have held on to most of their exchange
traded gold and central banks are still buying gold.
Weak hands are again being shook
out of the gold market but it remains prudent to retain an allocation to gold
and those who do so will be handsomely rewarded in the coming months and
years.
For breaking news and commentary on financial markets
and gold, follow us on Twitter.
OTHER NEWS
(Bloomberg) -- Gold May Be Due Short Term Bounce This
Week on Technicals
Gold may be due a ‘short-term bounce this
week’’ based on technical analysis, according to Christopher
Grosvenor, chief executive officer of Grosvenor Research & Analysis. The
following are comments from Grosvenor by e-mail yesterday. RSI is relative
strength index.
“Gold could be due for a short-term bounce this
week. Big picture, gold may find support in this zone and form the right
shoulder of an inverse head and shoulders price pattern that dates back to
the end of September last year.”
(Bloomberg) – IMF To Add $2.3 Billion To Reserves
Amid Rising Risks
The International Monetary Fund said it had estimated
net income of $2.3 billion in the fiscal year ended April 30, which it will
add to its precautionary reserves as a protection against growing risks.
“The Fund is facing increased credit risk in
light of a surge in program lending in the context of the global
crisis,” the IMF staff wrote in a report released today.
“While the Fund has a multi-layered framework for
managing credit risks, including the strength of its lending policies and its
preferred creditor status, there is a need to increase the Fund’s
reserves in order to help mitigate the elevated credit risks,” the
staff said in the report.
The Washington-based IMF is co-financing loans to
Greece, Ireland and Portugal to help stem the European debt crisis, with
Greece representing the IMF’s largest loan on record. As a result, the
IMF last month decided to raise reserves in the medium term to about $30.8
billion.
Net income last year was about $6 billion, including a
profit of about $4.9 billion from gold sales.
(Bloomberg) -- Gold ETF Assets in India Top Record 100
Billion Rupees in April
Assets in bullion-backed funds in India, the biggest
gold user, exceeded a record 100 billion rupees in April as investors bought
the metal for a haven and to diversify away from stocks.
Gold exchange-traded funds, or ETFs, had 102.2 billion
rupees ($1.9 billion) as of April 30, more than double the 48 billion rupees
a year ago and up from 98.9 billion rupees in March, the Association of
Mutual Funds in India said in data on its website on May 11.
Holdings in bullion ETFs globally were 2,383.395 metric
tons on May 11, the highest level this month, data tracked by Bloomberg show.
Gold futures in India traded near the all-time high reached in December,
climbing to within 0.5 percent of the record on May 3 as a weaker local
currency boosted prices, while the nation’s benchmark stock index had
its biggest weekly decline of 2012 last week.
“The perception in India is at least you
don’t make a loss in gold. It’s a safe investment,” Kishore
Narne, head of research at AnandRathi
Commodities Ltd., said by phone from Mumbai. “When the equity market is
not looking attractive and the headline space is grabbed by gold, more
investors are being diverted into gold.”
Bullion for June delivery fell 0.1 percent to 28,335
rupees per 10 grams on the Multi Commodity Exchange of India Ltd. as at 10:48
a.m. in Mumbai. Futures are up 3.7 percent this year.
“Gold was traditionally a jewelry-based market,
now it’s turning into an investor-based market,” in India, said Narne. Investors will continue to buy gold while prices
in India are above 25,000 rupees to 26,000 rupees per 10 grams, he said.
Assets in ETFs were also boosted during the month by
buying for an auspcious festival day and as prices
rose, said Chirag Mehta, fund manager with Quantum
Asset Management Co. in Mumbai.
(Bloomberg) -- Silver Traders Trim Bets on Price Rise,
CFTC Data Shows
Hedge-fund managers and other large speculators
decreased their net-long position in New York silver futures in the week
ended May 8, according to U.S. Commodity Futures Trading Commission data.
Speculative long positions, or bets prices will rise, outnumbered short positions by 12,563 contracts on
the Comex division of the New York Mercantile
Exchange, the Washington-based commission said in its Commitments of Traders
report. Net-long positions fell by 3,021 contracts, or 19 percent, from a
week earlier.
Silver futures fell this week,
dropping 5.1 percent to $28.89 a troy ounce at today's close.
Miners, producers, jewelers and other commercial users
were net-short 17,899 contracts, down 5,844 contracts, or 25 percent, from
the previous week.
Each Friday the CFTC publishes aggregate numbers for
long and short positions for speculators such as hedge funds and
institutional investors, as well as commercial companies that buy or sell
futures to protect against price moves. Analysts and investors follow changes
in speculators' positions because such transactions can reflect an
expectation of a change in prices.
NEWS
Euro Officials Begin to Weigh Greek Exit
– Bloomberg
Gold, silver fall in electronic trading
– MarketWatch
Gold ticks up on bargain hunting; off 4-month low
– Reuters
Global shares fall as deepening Greek turmoil weighs
– Reuters
Bullish Wagers Plunge Most in 2012 on Greek Impasse:
Commodities – Bloomberg
COMMETARY
Gold Bull Market Over? Not Even Close –
Gold Eagle
How euro money printing is going to drive up gold
and silver prices – Silver Seek
"We're getting to the heart of why you own
gold" – The Golden Truth
JPMorgan Estimates Immediate Losses From Greek Exit
Could Reach 400 Billion – Zero Hedge
McWilliams: Bob Marley and Financial Contagion –
David McWilliams
Mark
O’Byrne
Goldcore
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