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London Gold
Market Report
THE WHOLESALE MARKET gold price traded in a $3 range around
$1526 an ounce Friday morning London time, while stocks and commodities rose
and the Euro rallied in spite of concerns the IMF may halt the latest payment
of Greece's €110 billion bailout.
Heading
into the UK and US holiday weekend, gold prices at Friday lunchtime
looked set for a 1% gain on the week.
"[The gold
price] is presently in no-mans-land" says German precious metals trading
group Heraeus in its latest weekly report.
"Further
developments in price will depend on how things evolve on the sovereign debt
crisis... should things not ease, then gold should
remain expensive."
Safe
haven demand "remains bullish" adds Swiss precious metals group
MKS, but "we wouldn't rule out a small correction due to investors
booking their profits."
"We
expect gold denominated in Euros to outperform [the Dollar gold price ] on the back of the debt crisis in
Europe," says Friday's note from Standard Bank in London.
Silver
prices meantime hovered just below $38 per ounce this morning, a gain of
8% on the week.
"I
think people are cautious about silver after seeing what happened [on
Thursday]", a Hong Kong dealer told Reuters, referring to the
6%-in-three-hours silver price drop.
"There's
only a slight amount of physical [silver] buying. It's a holiday in the US
next week, so people may square off positions tonight," said the dealer,
adding that sentiment is "still bullish" for the gold
price "because of the problems in Greece."
The
Euro rallied on Friday morning – after hitting an all-time low
against the Swiss Franc on Thursday – despite concerns that the
International Monetary Fund may withhold the next payment in the Greek
bailout package, as Greece cannot guarantee its solvency.
"There
are specific IMF rules and one of those rules says that IMF can only take
action when the refinancing guarantee is given over 12 months," said
Luxembourg prime minister Jean-Claude Juncker,
chairman of the Eurozone finance ministers, on Thursday.
"Greece
cheated to get in [the Euro]," said Otmar Issing, former chief economist at the European Central
Bank, in an interview from Copenhagen Thursday.
Greece
"didn't meet the criteria" for Euro membership says Issing. Eurozone rules stated that a country's deficit be
no more than 3% of its GDP, and national debt no more than 60%.
"I
was among many economists in Germany warning against premature entry into the
monetary union and against too many countries."
Greece,
aided by investment bank Goldman Sachs, used "creative accounting"
to "mask the true extent of its deficit", according to a
report last year by German newspaper Der Spiegel.
Across
the Atlantic, details have emerged of previously undisclosed loans made by
the US Federal Reserve to major investment banks.
Goldman
Sachs, Credit Suisse and the Royal Bank of Scotland each borrowed over $30
billion in 28-day loans between March and December 2008.
Interest
rates on the loans – which were made as part of the Fed's
single-tranche open market operations – were as low as 0.01%.
"This
was a pure subsidy," says Robert A. Eisenbeis,
former head of research at the Federal Reserve Bank of Atlanta.
"The
Fed hasn't been forthcoming with disclosures overall. Why should this be any
different?"
Here in
the UK, Bank of England Monetary Policy Committee member Adam Posen said on
Friday that "the majority of the MPC is right to have held its nerve
against calls for [interest] rate hikes".
"Tightening
fiscal policy with no offset from additional monetary easing will strengthen
the underlying disinflationary pressures," wrote Posen in a Financial
Times guest column.
The
Bank of England has held rates at 0.5% since March 2009. Consumer price
inflation (CPI) for April was 4.5% year-on-year. CPI has now breached the
MPC's upper tolerance of 3.0% every month since January 2010.
Over in
China, meantime, leading precious metals consultancy GFMS forecast
Thursday that Chinese gold bullion imports will rise to 400 tonnes this year – equivalent to 15% of 2010 global
mine production and more than equal to China's own gold output – while
demand for silver will also outstrip domestic supply.
Ben Traynor
You
can receive
your first gram of Gold free by opening an account with Bullion Vault : Click here.
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