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London Gold Market
Report
SPOT MARKET gold
bullion prices hovered around $1780 an ounce Tuesday morning London time
– up 2.9% on yesterday's low – as stocks and commodities fell and
US Treasury bonds rose after news of economic slowdown in the heart of the
Euro area.
"Disappointing
Eurozone GDP figures...have further dampened sentiment, encouraging investors
to seek the relative safety of precious metals," says Marc Ground,
commodities strategist at Standard Bank.
Earlier on
Tuesday, gold bullion was "supported by Chinese buying...but
flows have been limited" according to one Hong Kong bullion dealer.
Silver
bullion prices meantime fell to a low of $39.32 per ounce – 0.6%
below where they closed on Friday – before rallying around lunchtime in
London, heart of the world's professional bullion market.
The volume
of gold bullion traded in London's wholesale market rose 4% in July
compared to the previous month, new data from the London Bullion Market Association
said today.
By contrast,
the average number of silver bullion ounces transferred went down
– falling 7.5% month-on-month – but from July 2010, silver
trading leapt 180% by volume and by 490% by value.
Gold
bullion transfers in London rose 11.6% year-on-year by volume, up by
47.2% by value.
"Gold
looks vulnerable...short-term," warns Standard Bank's Ground,
noting "the strong drop-off in speculative longs" held by traders
in US gold futures last week.
The 9% cut in
noncommercial – so-called speculative – trading positions on the Comex exchange "points to a market running out of
momentum," says Ground.
But "the
short-term outlook for gold remains positive," counters VTB Capital
analyst Andrey Kryuchenkov,
because "There are still far too many macro uncertainties."
"Everything
is pointing toward stagnation in the Euro area in the second quarter,"
said Juergen Michels,
London-based chief Euro area economist at Citigroup, on Tuesday morning, as
French President Nicolas Sarkozy and German chancellor Angela Merkel were due
to meet in Paris for further discussions of the ongoing European debt crisis.
The issue of
'Eurobonds' – joint-government bonds collectively backed by all
Eurozone nations – is expected to be on the agenda despite German
denials.
"We
don't plan on mentioning Eurobonds," Merkel spokesman Steffen Seibert
told reporters on Monday.
"It's
simply not a sensible idea."
But "the
alternative [to Eurobonds]," counters Anton Boerner,
head of Germany's BGA export association, "is the markets attack Italy,
then France, we lose our AAA-rating and then it's our turn."
"We'll
end up paying three times over. This way we pay just once."
Germany's
economic growth slowed to 2.7% year-on-year in the second quarter of the year
– down from a 4.9% annual growth rate in Q1 – according to data
published Tuesday.
Eurozone-wide
growth meantime slowed to 1.7% per year in Q2 – down from 2.5% the
previous quarter.
Here in the
UK, consumer price inflation rose to 4.4% in July, up from 4.2% the previous
month. The Bank of England – which has held its benchmark interest rate
at 0.5% for over two years – has an official CPI inflation target of
2%.
Retail price
inflation, and alternative measure of the cost of living, remained at 5%.
Over in New
York, hedge fund boss John Paulson meantime held onto his
substantial gold bullion position during the second quarter of the
year, documents filed with US regulator the Securities and Exchange
Commission show.
"Paulson...believes
that gold is earmarked to move substantially higher," reckons Mark Luschini, chief investment strategist at Janney Montgomery Scott, which manages $54 billion in
assets, citing "Dollar-debasing" US monetary policy as a potential
driver of higher Gold prices.
Paulson holds
a $4.6 billion of shares in SPDR Gold Trust (ticker: GLD) – the world's
largest gold ETF – news agency Reuters reports.
Fellow hedge
fund manager George Soros, by contrast, cut his holdings in the GLD by 13% in
Q2, according to the newswire. This leaves Soros holding around $6 million of
GLD shares – down from around $800 million at the start of the year.
Ben Traynor
You
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