India’s decision to revoke 80:20 gold import rule ‘surprising’ – UBS

Otmane El Rhazi from The Bullion Desk.

The decision on Friday by the Reserve Bank of India to remove the 80:20 rule on gold is surprising, UBS said, as is the fact that prices have not rebounded on the news.

The country’s central bank has scrapped the legislation that made it mandatory for companies to export 20 percent of any imported gold with immediate effect – UBS had expected the RBI to tighten regulation, the broker said in a note on Friday.

“We were certainly not alone on this line of thinking,” UBS said. “Local market participants had mentioned the possibility of outright import quotas, which would be a considerably negative development for gold”

“Import quotas would give the government the ability to explicitly determine how much gold can enter the country – if concerns on the current account deficit are elevated, then it could mean a very small quota and therefore be very restrictive,” it added.

The RBI’s withdrawal of the rule may have been influenced by the slump in oil prices following OPEC’s decision not to make any cuts to oil production, UBS suggested.

“A lower oil import bill helps ease the pressure on the current account deficit, allowing the government a bit more ‘wiggle room’,” the Swiss bank said.

India’s trade deficit was $13.4 billion in October, down from $14.2 billion in September but up from $10.8 billion in August.

Moreover, the muted response from the market is “baffling”, UBS said. Spot gold was last at $1,179.10/1,179.90 per ounce, down $9.80 on Thursday’s close and significantly below the 2014 peak of $1,388.

“The removal of the main constraint on the supply chain should be positive for gold as it frees up the inflow of metal into India, where appetite has remained quite healthy,” it added.

But the lack of response to the news is also understandable because investors are cautious about jumping to conclusions, UBS said, considering how keen the government has been on using gold import restrictions to contain the country’s deficit.

Indian gold imports have been strong in the past three months, surging to 150 tonnes in October after imports of 143 tonnes in September while buyers took advantage of low prices to stock up for the festival and wedding seasons.

“The possibility that the 80/20 rule would eventually be replaced with a more stringent system is not entirely eliminated and looking at current gold prices it seems that this is what market participants are focusing more on right now,” UBS added.

“As it currently stands, we believe the RBI announcement abolishing the 80/20 rule is good news for gold,” it said. “This allows the Indian gold market to be much more flexible in responding to price fluctuations and be able to easily take advantage of cheaper prices. In turn, we think this should give gold additional support on the downside when prices come under pressure.”

(Editing by Mark Shaw)

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GOLD WEBCAST – OPEC decision not to cut production sees gold retesting $1,180/oz

Otmane El Rhazi from The Bullion Desk.

The gold price continued to drop on Friday morning in a cross-commodity washout triggered by OPEC’s decision not to cut oil production. Lower energy prices are dampening sentiment in what could be either a pause in the breakout or a reversal of the gains of the past three weeks. Oil prices plunged after OPEC left its output limit at 30 million barrels a day. Brent crude oil subsequently slumped to a low of $72.78 per barrel, its cheapest since August 2010, while WTI hit $69.44, its lowest since June 2010. Spot gold was last at an intraday low of $1,182.00/1,183.80 per ounce, down $5.60 on Thursday close and with a retest of $1,180 on the cards.

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LBMA to take over ownership of platinum, palladium prices

Otmane El Rhazi from The Bullion Desk.

The London Bullion Market Association (LBMA) will take formal ownership of the platinum and palladium prices from Monday, it said, following an approach from the London Platinum and Palladium Fixing Co Ltd, pending legal agreements.

“The LBMA… has agreed to take ownership of the historic and future intellectual property (primarily price data) of what will now be called The LBMA Platinum Price and the LBMA Palladium Price,” it said in a statement to FastMarkets today.

The decision follows increased regulatory pressure and infrastructure issues that surround benchmarking. LPPFC lacks the necessary resources to deal with the increased pressure on companies that host benchmarks, with just one member of part-time staff currently dealing with the administration, the LBMA said.

Moreover, it was suggested that the LPPFC felt that the LBMA’s work with the gold and silver prices made it a better host for the prices due to its legal and support infrastructure.

The intellectual property, which includes historic data, will now be held by Precious Metals Prices Ltd, a newly established subsidiary of the LBMA.

The London Metal Exchange is shortly due to take over administration of the benchmark pricing of the two prices, which as of Monday will be the LBMA Platinum and LBMA palladium price.

(Editing by Mark Shaw)

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Gold price could retest $1,180, OPEC decision weighs on sentiment

Otmane El Rhazi from The Bullion Desk.

The gold price continued to drop on Friday morning in a cross-commodity washout triggered by OPEC’s decision not to cut oil production.

Spot gold was last at an intraday low of $1,184.00/1,184.80 per ounce, down $4.60 on Thursday close and with a retest of $1,180 on the cards.

Lower energy prices are dampening sentiment in what could be either a pause in the breakout or a reversal of the gains of the past three weeks.

“Precious metals are generally holding up well given the down draft from oil; if the dips continue to remain well supported, rebounds could continue at a steady pace. A steady rebound will also lessen the chance of aggressive short-covering rallies, which should keep the market more orderly,” FastMarkets analyst William Adams said.

Oil prices plunged after OPEC decided left its output limit at 30 million barrels a day. Brent crude oil subsequently slumped to a low of $72.78 per barrel, its cheapest since August 2010, while WTI hit $69.44, its lowest since June 2010.

“The slump in oil prices is clearly weighing on prices because it will drive the already low inflation rate even further down, meaning that gold becomes less attractive as a means of hedging against a loss of purchasing power,” Commerzbank said in a note.

Also weighing on sentiment is a stronger dollar at 1.2444 against the euro after the European Central Bank earlier this week hinted at introducing a quantitative easing programme in the next quarter.

Trading in the US is likely to remain subdued again after the Thanksgiving holiday on Thursday.

In data, the EU flash CPI estimate was 0.3 percent as forecast, albeit down from the previous 0.4 percent, while the core CPI estimate at 0.7 percent was also as predicted, as was the unemployment rate at 11.5 percent.

French consumer spending at -0.9 percent undershot, as did the Italian preliminary CPI at -0.4 percent and the Italian monthly and quarterly unemployment rates.

Japan’s housing starts are declining at a slowing rate – they came in at -12.3 percent – but German retail sales climbed 1.9 percent after a 2.8-percent drop previously.

In the Swiss referendum on gold on November 30, polls indicate that support for the ‘yes’ campaign is waning – most traders appear to see a ‘no’ vote as a foregone conclusion.

In the other metals, silver was last at $16.00/16.12 per ounce, down 13 cents. Platinum at $1,213/1,218 was up $3 and palladium at $800/806 was unchanged.

(Editing by Mark Shaw)

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BASF, three banks accused of manipulating platinum/palladium prices

Otmane El Rhazi from The Bullion Desk.

The four companies that participate in the platinum and palladium fixes have been sued in a New York court for allegedly manipulating the price of the metals.

Modern Settings LLC, a jewellery and police badge manufacturer, filed a lawsuit alleging that Standard Bank, HSBC, Goldman Sachs and BASF, the world’s largest chemicals maker, shared customer data to use the ‘front running’ method of market manipulation in which traders profit by using ‘spoof’ orders to capitalise on their clients’ trading intentions.

The banks would make large orders, it claims, to bait the market to react to what other participants believed were genuine increases or decreases in supply or demand, which they had no intention of executing, Modern Settings alleges.

“Defendants and their co-conspirators were privy to and shared confidential, non-public information about client purchase and sale orders that allowed them to glean information about the direction of platinum and palladium prices,” the suit claims. “And consequently, gave them the ability to execute trades in physical platinum and palladium and platinum and palladium based financial products in advance of those movements.”

The price of physical metal and derivatives are affected by the alleged manipulation in benchmarks because these instruments are inextricably linked to the prices, Modern Settings contends.

Modern Settings and other members of the industry have lost tens of thousands of transactions involving physical metal and PGM-based financial products because of the alleged manipulation, it said.

The platinum and palladium fixings are currently set twice a day via a teleconference between BASF, Goldman Sachs, HSBC and Standard Bank. Modern Settings claims manipulation took place “at least” during the afternoon fix.

The market makers are accused of discussing strategies and orders prior to the fix to coordinate strategies while also communicating via phone simultaneously to physical and derivatives trading desks as well as other banks’ respective desks to ensure that the prices moved in a certain pre-determined manner.

Platinum and palladium prices would frequently return to their pre-fixing levels shortly after the fixings took place, Modern Settings argues. “Experts’ statistical analyses have shown that these price moves are highly anomalous and suggestive of price artificiality,” it says.

Last month, the LBMA selected the LME to administrate the benchmarks as an independent third party – increased regulatory scrutiny of the precious metals markets and benchmarks in general has led to an overhaul of the manner in which they are undertaken.

From December 1, The London Metal Exchange will host the administration through its LMEBullion system after promising to establish an updated pricing system that will be compliant with all regulatory protocols, established by IOSCO, an independent financial industry watchdog.

But the changes have come too late for many of the parties that deal in platinum- and palladium-based products, according to Modern Settings.

The firm is representing all parties who traded or held in the US physical platinum and palladium or derivative products that settled or were marked-to-market at the fixings, NYMEX futures and options beginning as early as January 1, 2007.

(Editing by Mark Shaw)

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Mumbai gold premiums slip but Nov imports could exceed 100 tns again

Otmane El Rhazi from The Bullion Desk.

Gold premiums in Mumbai have dropped after the start of the Indian wedding season but November imports could well exceed 100 tonnes for the third month running, according to early indications.

Spot gold has staged a small recovery in recent sessions and physical demand in Asia is showing signs of improvement, premiums in India are falling after buying for the wedding season died down.

Spot rates in Mumbai have fallen to $10-15 over spot for 1kg bars, sources said, from $18-$20 a week ago, although a handful of deals are being secured as high as $18 in some areas.

“The majority of gold purchases [for] the Indian wedding season have already been done ahead of the first wedding on November 22,” Metals Focus’ Chirag Sheth told FastMarkets. “Most people buy up their gold for weddings at least a month before.”

Imports in November could be far higher than this year’s monthly average – imports in the first half of November were around 102 tonnes, Commerzbank said on Wednesday, citing reports from the Indian media. The country imported around 150 tonnes in October.

High imports could also reflect buying ahead of a possible tightening of import restrictions by Reserve Bank of India (RBI) to tackle the country’s ballooning current account deficit (CAD).

“People are both panicking and confused – they know that it is coming but they don’t know when,” one source told FastMarkets. “They see this as an opportunity to oversupply themselves ahead of the pick-up in demand in January and February.”

An announcement on changes to legislation could come as soon as next week, another source close to the matter said, although the RBI might first wait until import numbers for the whole of November are available.

As well, the country is in no rush to implement any new rules while both Prime Minister Narendra Modi and RBI governor SS Mundra are out of the country and the slump in oil prices has eased some of the pressure on the CAD.

The new rules are more likely to involve caps on imports rather than raising the duty from the current 10 percent, sources suggested.

“They will cap the amount of gold that can be imported and how much each importer can bring in,” one said.

In China, spot premiums on the Shanghai Gold Exchange remain at $2 over spot, with demand starting to look healthier while consumers take advantage of cheaper prices in preparation for the Chinese New Year in February, an auspicious period to gift gold, market observers said.

Prices on international markets have recovered to current levels either side of $1,200 per ounce from four-year lows of $1,131.60 in October, albeit down from a 2014 peak of $1,388.

Hong Kong’s net exports of gold into China, commonly used as a barometer for Chinese demand, rose to a seven-month high in October at 111 tonnes.

Still, Macquarie questioned whether “the Hong Kong export data is becoming a less reliable guide to all of China’s imports, with press reports indicating the Chinese want more gold to come into Shanghai directly from other countries, not via Hong Kong”.

The continued clampdown on commodity imports for the purpose of financing has been choking off local demand, sources indicated.

The Hong Kong rate premium is unchanged at $1.50 as was the Singapore rate at $1.50, while Dubai slipped to $1.

(Editing by Mark Shaw)

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Gold price steady, could climb as physical demand perks up

Otmane El Rhazi from The Bullion Desk.

Gold has once again shrugged off downside pressure from a stronger dollar and is finding support from an uptick in physical buying, although it remained rangebound either side of $1,200 in morning trading on Wednesday.

Spot gold was last at $1,196.0/1,196.80 per ounce, down $4.70 on Tuesday’s close but confined to a narrow sub-$5 intraday range with a peak of $1,208.

“The gold price is… currently defying both the rising equity markets and the firm US dollar. It is finding support from reviving physical demand in Asia,” Commerzbank said in a note.

“China’s appetite for gold is also increasing again: according to data from the Census and Statistics Department of the Hong Kong government, China imported 111.4 tonnes of gold from Hong Kong in October, the highest quantity since February,” it added.

Chinese physical demand had been underperforming, with premiums on the Shanghai Gold Exchange fluctuating between $0 and $1/$2 over spot.

In India, imports reportedly totalled 102 tonnes in the first half of November compared with 150 tonnes in the whole of October. The Reserve Bank of India is reviewing import restrictions to tackle the country’s ballooning current account deficit, which may be encouraging buying ahead of any tightening of legislation.

Also influencing prices is a failure of key OPEC members yesterday to pledge to make output cuts ahead of a Thursday meeting, which sent oil prices lower and triggered a mild sell-off in bullion.

“The precious metals look firm and are well placed to push higher. Judging by the nervous negative reaction to the OPEC development yesterday, we need to be wary that gold could sell off if oil sells off tomorrow, although the market might now have discounted the likelihood of no cut in OPEC production,” FastMarkets analyst William Adams said.

In currencies, the dollar remains strong at 1.2450 against the euro despite mixed US data on Tuesday; equity markets are also stronger ahead of predicted interest-rate rises in 2015.

The CAC 40 is up 0.07 percent, the DAX 0.63 percent and the Euro STOXX 0.24 percent. Yesterday, the Nasdaq closed up 0.07 percent, while the S&P closed down 0.12 percent and the DOW 0.02 percent.

In data, German import prices at -0.3 percent were as forecast but numbers from the US this afternoon will be eyed for near-term direction. Core durable goods orders, unemployment claims, the core PCE price index, durable goods orders, personal spending and personal income figures are due before new home sales and UoM consumer sentiment and inflation expectations.

In the other metals, platinum at $1,219/1,224 per ounce was up $2 while palladium was $7 higher at $795/800. Silver at $16.57/16.62 was down six cents but at $16.70 earlier was just short of a three-and-a-half-week high.

Bargain hunting in silver suggests improves sentiment in bullion. The gold-to-silver ratio climbed steadily from 62.81 in August to 75.44 on November 14 but was last at 71.96.

(Additional reporting by Lynette Tan, editing by Mark Shaw)

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French far-right leader Le Pen calls for gold reserves to be repatriated

Otmane El Rhazi from The Bullion Desk.

Marine Le Pen, leader of the far-right Front National party in France and currently the frontrunner for the presidency of the country, has called on the central bank to repatriate its gold reserves.

In an open letter penned to Christian Noyer, the governor of the Banque de France, Le Pen demanded the urgent repatriation of all gold reserves located abroad and the immediate discontinuation of any gold sales programmes.

She called for a complete audit of the inventory of 2,435 tonnes of physical gold by an independent French body to indicate in which country France’s gold reserves are currently stored.

She also demanded a gradual reallocation of a portion of foreign exchange reserves within the Banque de France, recommending that the central bank buy gold at each significant decrease in spot pricing.

Spot gold has recovered to current levels either side of $1,200 per ounce from four-year lows of $1,131.60 in October.

France is the fifth-largest holder of gold in the world, behind only the US, Germany, the IMF and Italy, according to the November central bank holdings report by the World Golf Council – it holds 2,435.4 tonnes of gold, accounting for 65.1 percent of reserves.

Between 2004 and 2012, France sold 614.6 tonnes of gold during a period when, according to Le Pen, other central banks in the eurozone had agreed to limit gold sales.

Germany and the Netherlands are already repatriating their gold reserves and Switzerland may follow suit, depending on the results of this weekend’s referendum.

De Nederlandshe Bank (DNB), the Dutch central bank, said last week it has repatriated 20 percent of its gold reserves from the US back into the country’s vaults. Around 122 tonnes of the metal have been shipped to Amsterdam, worth more than $5 billion at current spot prices.

And on Sunday, voters in Switzerland will decide whether or not to outlaw further gold sales from the Swiss National Bank, to make physical bullion at least 20 percent of the bank’s assets and whether to repatriate Swiss-owned gold.

Should the country still vote in favour of these proposals, the SNB will be forced to enter the physical bullion market to raise its gold holdings from around 7-8 percent at present, according to World Gold Council statistics.

(Editing by Mark Shaw)

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Hedge funds catching up to gold, silver price rally – MINING.COM

Otmane El Rhazi from The Bullion Desk.

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Gold Standard Won’t Solve ‘Reserve’ Dollar Problem – WSJ

Otmane El Rhazi from The Bullion Desk.

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FEATURE-Peru crackdown on illegal gold leads to new smuggling routes – REUTERS

Otmane El Rhazi from The Bullion Desk.

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Swiss ‘no’ vote could still have implications for gold market – HSBC

Otmane El Rhazi from The Bullion Desk.

A ‘no’ vote in the Swiss gold referendum on November 30 could lead to rapid liquidations of positions by investors, HSBC said.

On Sunday, voters in Switzerland will decide whether or not to outlaw further gold sales from the Swiss National Bank, to make physical bullion at least 20 percent of the bank’s assets and whether to repatriate Swiss-owned gold.

But support for the ‘Save our Swiss Gold’ initiative appears to be slipping, with the latest poll having the ‘yes’ vote at 38 percent, with 47 percent against and 15 percent undecided.

The results of the poll, conducted by research institute gfs.bern and Swiss broadcaster SRG, are in line with a previous poll by news organisation 20 Minuten, which said that public support for the ‘yes’ vote had fallen to 38 percent from 45 percent.

“The bulk of opinion in the market appears to favour a ‘no’ vote and although a rejection of the provision by voters would not be surprise, it could deal a modest psychological blow to the market and help reaffirm the bear trend in prices,” HSBC said in a report on Tuesday.

“[But] we believe a “no” vote is priced in by the market and would not expect a significant impact on gold prices,” it added.

The spot gold price has risen to around $1,200 per ounce from four-year lows just three weeks ago at $1,131.60 – a rise that has in part been attributed to the Swiss referendum.

But the bank does not believe the recent rally is tied to the referendum, instead attributing the recent gains in the market to increased purchases in emerging markets where price-sensitive consumers are responding to lower prices.

On the other hand, the impact of a ‘yes’ vote on the market could be “notable”, HSBC said, because it would force forced the Swiss National Bank to buy nearly $60 billion of gold at current spot prices to raise its holdings to 20 percent from around 7-8 percent at present, according to World Gold Council statistics.

“It would also be a strong signal in support of the utility of gold and may help galvanize the bullion market,” it added.

Switzerland has 1,040 tonnes of gold in its reserves and would therefore need to buy another 1,500 tonnes of metal to bring gold holdings up to 20 percent of its assets, a figure that is “roughly equivalent to all of China’s gold consumption for 2013 [and would] also equate to about half of annual global mine output”, the bank said.

“While the SNB has five years, according to the referendum, to complete the purchases, the market would factor the increase in demand in immediately,” it added.

But with the gold market having trended lower since April 2013, when the 100,000 signatures needed to bring the issue to a referendum were amassed, HSBC finds it ” difficult to believe that investors are seriously worried the referendum will pass. This could change, however, as the date for the referendum nears, as we could see precautionary buying.”

(Editing by Mark Shaw)

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Swiss Central Bank Chief Warns on Impact of Gold Vote – WSJ

Otmane El Rhazi from The Bullion Desk.

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Platinum seen in record 1.33 mln oz deficit in ’14 – Johnson Matthey

Otmane El Rhazi from The Bullion Desk.

Johnson Matthey expects the platinum market to record a third consecutive annual deficit of 1.33 million ounces in 2014, it said, after industrial action in South Africa earlier this year hit primary supply heavily.

The five-month strike that ended in June will lower primary supply by 1.3 million ounces to bring overall supply in 2014 to 5.1 million ounces, the company said in a webinar on Monday.

Still, destocking of 450,000 ounces by South African producers helped to alleviate the impact of the strikes and limit supply losses from South Africa to just 18 percent, it said.

JM expects gross demand for jewellery to contract by just more than one percent in 2014 – moderate demand growth in Japan has offset lower demand in the US and Europe.

Spot platinum is currently at $1,222/1,227 per ounce, down from a peak of $1,520 in July and from $1,371 at the start of the year.

In autocatalyst use, predominantly in Europe, the introduction of Euro VI regulations governing exhaust emissions in Europe has substantially increased average loadings, JM said.

Primary supply from South Africa should recover strongly, it said, while supply from elsewhere will remain broadly flat, with gross demand anticipated to rise on automotive demand and improvements in industrial purchasing.

Palladium should also record a heavy deficit this year – JM pegs it at 3.948 million ounces – with the end of Russian government stock sales and industrial action in South Africa contributing to lower primary supply.

After years of selling, Russian government stock are “very close to zero, if not zero”, according to Johnson Matthey, which will contribute to the loss in total supply for the year.

It expects overall supply to be 6.204 million ounces against higher gross demand from the strong investment and autocatalysts sectors.

Still, palladium supply was comparatively less affected by the South African strikes because most facilities are concentrated in the northern and eastern limbs of the Bushveld Complex, which were not directly affected. Furthermore, sales from inventories will offset some of the losses from the strikes.

Demand for use in autocatalysts will continue to underpin the market – it is seen exceeding seven million ounces for the first time.

This has been strong year for investment demand – investors in North America and Europe have shown strong interest during the period of weaker prices, particularly in ETFs, although investment demand is unlikely to be as strong next year, JM said.

Palladium was last at $791/796 per ounce, down from a peak of $911.50 in September and up slightly from $716 at the start of the year.

Primary supply from South Africa should recover strongly, JM said, although total world supplies will remain well below 1995-2013 levels.

The recovery of palladium supply through autocatalyst recycling is expected to increase but the demand from the auto sector will increase mainly in China and North America.

“Unless there is significant liquidation in investment holdings, the market is likely to remain in substantial deficit for a fourth consecutive year,” JM said.

(Editing by Mark Shaw)

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OPINION – What Does the End of QE Mean for the Precious Metals?

Otmane El Rhazi from The Bullion Desk.

• Investors may be seriously misjudging the impact of QE3’s end

• Negative real interest rates may continue for years, sparking inflation

• The Fed could even inject more stimulus though a new QE programme

The Federal Reserve recently announced it has ended its monthly money creation and bond-buying programme known as quantitative easing. What will the Fed’s halt of bond purchases at the $4-trillion mark mean for precious metals markets?

The answer may be: not much.

Sure, gold and silver prices did fall after the Fed’s final taper. But the end of these monthly bond purchases now appears to have been fully priced into the markets.

The US Dollar Index rallied strongly from July through October – in part on euro weakness and relatively positive economic data in the US. Nominal strength in the dollar exerted downward pressure on the precious metals. Gold slumped and silver fell even more sharply.

Metals Markets Often Move Counter to Popular Expectations

It’s worth recalling what happened when QE3 was announced in September 2012. At the time, many analysts assumed that QE3 would provide an immediate boost to gold and silver prices. Instead, the metals markets responded counter-intuitively, declining for several months following the Fed’s announcement.

Fast forward to November 2014 and almost nobody expects the post-QE world to be bullish for precious metals. In fact, speculative interest in gold and silver sits at multi-year lows. Hedge funds are collectively showing one of their lowest net long positions in the silver market on record.

The Fed’s final termination of QE isn’t suddenly turning the hot money crowd even more bearish on metals. That crowd has already positioned itself on the short side.

At the same time, the end of new Fed bond purchases could spark a revolt against the US stock and bond markets, which have until now been floating on a rising sea of Fed liquidity. Previous cessations of Federal Reserve stimulus programmes have led to significant corrections in equity markets.

When the Fed Finally Hikes Rates, It Will Probably Be Chasing Inflation Higher

Of course, the Fed has no immediate plans to unload the more than $4 trillion in bonds it has accumulated on its balance sheet. Nor has it yet committed to raising its benchmark Federal funds rate, despite widespread expectations that it will do so by the end of 2015.

Fed chair Janet Yellen stated recently: “The appropriate path of policy, the timing and pace of interest rate increases ought to – and I believe will – respond to unfolding economic developments. If those were to prove faster than the committee expects, it would be logical to expect a more rapid increase in the Fed funds rate. But the opposite also holds true.”

In other words, if the economic numbers – especially those related to employment – turn ugly, the Fed might refrain from raising rates – or even introduce a new stimulus programme. Yellen has repeatedly indicated that stimulating job growth, as she sees it, takes precedence over fighting inflation.

That means the Federal Reserve may not raise rates until inflation begins spiralling out of control. In a Wall Street Journal survey of 30 economists, all but three expect the Fed to wait too long before raising short-term rates rather than move too soon.

In the months ahead, the financial media can be expected to speculate incessantly on the Fed’s next move and when it might come. Disciplined precious metals investors should ignore the Fed-gaming chatter and focus instead on what real interest rates are doing.

The Fed does not directly control whether long-term or even short-term rates are positive or negative in real terms. Negative real interest rates, which refer to rates that sit below the inflation rate, are generally bullish for precious metals. Negative real interest rates can persist or even become more deeply negative while the Fed is raising the short-term rate.

That is what happened during the great precious metals bull run of the late 1970s. The Fed was perpetually behind the curve on rate increases as inflation galloped higher.

Mike Gleason, a director at Money Metals Exchange, noted in a podcast earlier this year: “During the great gold and silver bull run of the late 1970s, the Fed wasn’t slashing rates. It was doing the opposite. The Fed kept raising rates, but it didn’t get out ahead of inflation until [then-Fed chairman] Paul Volcker stepped in and jacked rates up to punishing double-digit levels.”

Market Conditions Remain Favorable for Gold and Silver Accumulation

There is a widespread misconception that only rate cuts or more QE would be bullish for gold and silver. On the contrary, rising inflation pressures forcing the Fed to raise rates would potentially be quite bullish for gold and silver as well.

Instead of fearing rate hikes, metals investors should actually look forward to the next rate-raising cycle. That’s when the biggest gains in gold and silver could come.

At some point, real interest rates may turn positive and precious metals prices may get overextended to the upside. But neither situation exists under current market conditions.

This remains a favourable period for investors to accumulate physical precious metals while the herd isn’t paying attention.

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GOLD WEBCAST – Gold breaks heavy resistance at $1,200 after more PBoC stimulus

Otmane El Rhazi from The Bullion Desk.

The gold price has again broken through heavy resistance at $1,200 after multiple attempts throughout the week, despite the dollar making gains early in the session. Spot gold was last at $1,205.70/1,206.50 per ounce around the time of the US market open, up $13.50 on Thursday’s close and not far off a high of $1,208 struck at 13:13 GMT, its highest in three weeks. The gains follow China’s cuts to its interest rates, with the one-year lending rate now down to 5.6 percent and the deposit rate at 2.75 percent. The central bank also raised the deposit-rate ceiling to 1.2 times the benchmark. The dollar was bolstered early this morning following a dovish speech from ECB president Mario Draghi, who said that “a stronger recovery is unlikely in the coming months,” and that “the inflation situation in the euro area has also become increasingly ch

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India’s central bank cautious on response to gold import surge – REUTERS

Otmane El Rhazi from The Bullion Desk.

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Ukraine Gold Reserves Contract as Russia Buys More Bullion – BLOOMBERG

Otmane El Rhazi from The Bullion Desk.

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Swiss National Bank’s Zurbruegg Repeats Opposition to Gold Vote – WSJ

Otmane El Rhazi from The Bullion Desk.

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Gold price down on Draghi speech, close above $1,200 crucial

Otmane El Rhazi from The Bullion Desk.

The gold price stepped back from $1,200 following dovish comments from ECB president Mario Draghi that boosted the dollar in early-morning London trading.

Spot gold was last at $1,188.70/1,189.50 per ounce, down $3.50 on Thursday’s close and having earlier peaked at $1,199.70.

The euro dropped to 1.2460 against the dollar from 1.2668 after Draghi said that “a stronger recovery is unlikely in the coming months,” and that “the inflation situation in the euro area has also become increasingly challenging”. But the ECB will do what it can to lift inflation “as fast as possible”, he reiterated.

Bulls in the market will watch price movements closely today after rallies in the two previous Friday afternoon sessions over the particularly last week when gold climbed $30 as London passed the torch to New York.

“The longer prices have avoided retesting the lows, the more it looks like a base is in place, especially above $1,180. The more it looks a base is in place, the more the shorts might decide to take their profits, which could trigger more short-covering,” FastMarkets’ William Adams said.

“The past two Fridays have seen sharp rallies in bullion – we wait to see if the same happens again today,” he added.

A close above $1,200 would boost confidence, with heavy resistance at that number after multiple attempts to break it throughout the week.

Physical demand this week has been unsettled by news that the Indian government is assessing its gold import restrictions while Chinese demand has improved but premiums remain fairly flat.

“Physical demand has been more active from China over the past week, with volumes on the SGE picking up, but premiums still remain fairly soft yesterday, trading around flat. Chinese banks are looking to pick up their import quotas into year-end, which seems to be a decent source of demand leading,” MKS said in a note.

There is no front line data due today although Bundesbank president Jens Weidmann will give a speech later this morning.

In the other metals, silver has traded in a 28-cent intraday range but was last unchanged at $16.19/16.24 per ounce.

Platinum and palladium both performed well in the previous session on further reports that South African power producer Eskom is struggling to maintain power to many of the country’s producers.

Platinum hit its highest in over two weeks this morning at $1,225 before settling back at $1,216/1,222 per ounce, up $14, while palladium at $774/780 was up $9.

(Editing by Mark Shaw)

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Gold price could test $1,200oz, investors look for convincing breakout

Otmane El Rhazi from The Bullion Desk.

The gold price was steady during Friday’s morning sessions, although a decisive break above the psychologically important $1,200 level remains out of reach. Still, analysts say, that the yellow metal could well move higher in today’s sessions.

Spot gold was last at $1,193.90/1,194.70 per ounce, a $1 increase on the previous day’s close.

“Precious metals are well placed to extend higher, bullion for oversold reasons and the PGMs for oversold and fundamental reasons. The past two Fridays have seen sharp rallies in bullion – we wait to see if the same happens again today,” said FastMarkets analyst William Adams.

“Gold could gravitate towards the $1,200 level for Monday’s COMEX option expiration where there is a decent amount of open interest,” added MKS Capital.

“While the current macro environment of low inflation and a strong US dollar has provided a headwind for bullion, a convincing break above the $1,200 level may invite buying from momentum investors,” said James Steel at HSBC.

Should the gold price continue to trade below this level- which is below the cost of production – then producers may have second thoughts for project expansions, Steel added.

After a busy data session yesterday, when PMI numbers from China and the US disappointed, the schedule is quiet today, with no market-moving numbers scheduled for release.

Silver at $16.26/16.31 was up against the previous close of $16.1.

Platinum was up $10 at $1,215/ 1,220 and palladium increased $5 to $773/779.

“PGM’s had a solid session yesterday, rallying on news that power cuts were still providing an issue for South African miners,” said MKS Capital.

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Unusual gold moves in Asian hours puzzle jittery traders – REUTERS

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Russia adds 18.6 tonnes of gold to reserves in October – CBR

Otmane El Rhazi from The Bullion Desk.

Russia has sustained its efforts to stockpile gold as its rouble continues to take a beating on international markets, adding 18.6 tonnes in October, according to the Central Bank of the Russian Federation’s figures.

Russia’s gold reserves now stand at approximately 1,169 tonnes, the figures say, compared with the World Gold Council’s November figures of 1,149.8 tonnes, which takes readings on a two month arrears basis.

The news comes amid a sharp decline in the rouble – down more than 25 percent against the dollar this year, hitting an all-time low at 48.60 – after western countries imposed economic sanctions on Russia following its support of separatists in Ukraine.

The slump in oil prices to around $80 per barrel from nearer $110 at the start of the year has weighed in particular. Western sanctions have deliberately targeted the oil and gas industries, which account for upwards of 40 percent of the Russian government’s income.

Central banks have been looking to shore up their currencies with physical assets that hold high value, buying 93 tonnes of gold in the last quarter the WGC said, down nine percent year-on-year, but the 15th consecutive quarter where they remained net buyers.

Third-quarter gold demand fell two percent year-on-year to 929 tonnes. Overall gold demand remained subdued, but the decline was less severe than the second quarter’s 16-percent drop.

In value terms, third-quarter gold demand of $2.3 billion was down six percent on a year ago.

(Editing by Martin Hayes)

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Mine closures, output cuts likely if gold price stagnates – Metals Focus

Otmane El Rhazi from The Bullion Desk.

The lower gold price could trigger a drop in South African gold production, according to Metals Focus, with many producers operating at a loss at current prices.

With a weakening rand – down five percent against the dollar in the year to date – already plaguing the South African economy and increasing energy and labour costs at mines in the region, it comes as no surprise, that three major South African producers have announced restructuring plans, the consultancy said in a note on Thursday.

With spot gold currently flirting with $1,200 per ounce, down from a 2014 peak of $1,388.70, some eight percent of costed South African gold production is marginal or loss-making on a total cash cost basis, representing around 10 tonnes of annualised production, Metals Focus said.

“If prices persist at current levels or weaken further, then further shaft closures, with the potential for industrial action, job losses and production cuts, appears likely,” it said.

All-in sustaining costs at AngloGold Ashanti, the world’s eighth-largest gold mining company, rose 14 percent to average $1,115 per ounce in the third quarter of 2014 from the first quarter. This has prompted the company to begin talks with unions and employees regarding possible job losses.

“[Since] AngloGold has stated that it would not be closing any operations, employee levels at its mines would most likely have to be reduced in order to lower costs,” Metals Focus said.

Sibanye Gold, another of the country’s largest producers, said last month it was in talks with workers and other stakeholders about potential redundancies at its Cooke 4 shaft, which employs 2,500.

“The National Union of Mineworkers (NUM) initially spoke of workers striking, but has now signed a deal with Sibanye to soften the job cuts. Some of the workers at the mine will be offered voluntary severance packages while others will be transferred to other operations,” Metals Focus said.

Earlier this year, Harmony Gold put one of its operations under care and maintenance and has begun negotiations with employees, ahead of potential job cuts, despite an increase in output in the third quarter.

Total cash costs rose one percent over the same period to average $1,042 per ounce, although all-in sustaining costs fell three percent to $1,254.

(Editing by Mark Shaw)

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FOMC debates rate hike communication but not specific timing

Otmane El Rhazi from The Bullion Desk.

The US Federal Reserve sees improvements in US labour and inflation conditions and is laying the foundation for a future rate hike but the October minutes ultimately provided few clues on when exactly that might happen.

The Federal Open Market Committee (FOMC) is clearly concerned about upending the recovery and exacerbating market volatility by prematurely or ineffectively communicating the long-awaited rate hike. The market currently expects the Fed to raise rates in mid-2015.

Much of the FOMC’s debate centred on whether or not it should keep language in its policy statement that pledged to keep key short-term interest rates low for a “considerable time” even after ending its quantitative easing programme.

While some participants preferred to eliminate “considerable time” phrase, these committee members were concerned that such a characterization could be misinterpreted as suggesting that the FOMC’s decisions would not depend on the incoming data.

“A couple of them noted that the removal of the ‘considerable time’ phrase might be seen as signalling a significant shift in the stance of policy, potentially resulting in an unintended tightening of financial conditions,” the minutes said.

Meanwhile, other thought that the current forward guidance might be read as suggesting an earlier date of liftoff than was likely to prove appropriate, given the outlook for inflation and the downside risks to the economy associated with the effective lower bound on interest rates.

ON EUROPE AND ELSEWHERE

There was also quite a bit of discussion on economic developments abroad, with FOMC participants pointing to a somewhat weaker economic outlook and increased downside risks in Europe, China, and Japan.

“It was observed that if foreign economic or financial conditions deteriorated further, US economic growth over the medium term might be slower than currently expected. However, many participants saw the effects of recent developments on the domestic economy as likely to be quite limited,” the minutes said.

ON INFLATION

Most FOMC participants anticipated that inflation was likely to edge lower in the near term, reflecting the decline in oil and other commodity prices and lower import prices.

“These participants continued to expect inflation to move back to the FOMC’s two percent target over the medium term as resource slack diminished in an environment of well-anchored inflation expectations, although a few of them thought the return to 2 percent might be quite gradual,” the minutes said.

“A couple of participants noted that it was likely too early to draw conclusions regarding these developments, especially in light of the recent market volatility. However, many participants observed that the Committee should remain attentive to evidence of a possible downward shift in longer-term inflation expectations; some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered,” the added.

MARKETS SLIP

The reaction by US equity markets wasn’t particularly dramatic but prices did generally trend a little lower. The Dow Jones industrial average and S&P 500 were last down 0.22 percent and 0.35 percent respectively.

As for commodities, Comex gold futures were at $1,185.70 per ounce, which was $9.10 below the pre-FOMC levels, while most-actively traded Comex copper contract was at $3.0375 per pound, down 0.7 cents.

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Gold gains as dollar falls in the wake of Japan economic moves – MARKET WATCH

Otmane El Rhazi from The Bullion Desk.

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Russia Adds More Gold as Sanctions Weaken Ruble to Record Low – BLOOMBERG

Otmane El Rhazi from The Bullion Desk.

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Gold slumps below $1,180, support for Swiss gold plan wanes

Otmane El Rhazi from The Bullion Desk.

The gold price again failed to hold above $1,200, retreating below the key downside level of $1,180 on fading support for the Swiss gold initiative.

Spot gold was last at $1,178.20/1,179.00 per ounce, down $16 on Tuesday’s close, after a poll showed that public support for the proposal to outlaw further gold sales from the Swiss National Bank, make physical bullion at least 20 percent of its assets and repatriate Swiss-owned gold had fallen to 38 percent from 45 percent.

Later today, the all-important US FOMC meeting minutes could provide guidance on when the US may raise interest rates, which has also swayed precious metals sentiment.

Should the US Federal Reserve, which is largely seen raising rates in mid-2015, adopt a hawkish tone in the minutes in line with the strengthening US economy, the dollar is likely to strengthen and gold’s credentials as a safe-haven asset would be dampened.

Higher interest rates will have a negative effect on the gold market, pushing investors to yield-bearing assets such as equities and bonds.

“[Even though] I really don’t expect [the FOMC] to come out with anything earth shattering, the market will no doubt be nervous ahead of it,” Marex Spectron’s David Govett said.

“I would be more reluctant to take a position today and would rather keep an eye on the dollar for intraday moves. Let’s get the minutes out of the way and then see where we go from there,” he added.

In data already released, the EU current account at 30 billion euros beat the forecast 21.3 billion euros. From the US, housing starts fell 2.8 percent to 1.01 million in October, down from 1.04 million in September, although housing starts at 1.08 million were at a multi-year high and up for the third consecutive month.

Silver followed gold lower, slumping below the $16 level – it was last at $15.94/15.99 per ounce, down 16 cents, while platinum at $1,187/1,192 was $9 lower and palladium at $766/771 was down $3.

(Editing by Mark Shaw)

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GFMS lowers FY silver price forecast 20.1 pct, demand down 7 pct

Otmane El Rhazi from The Bullion Desk.

Spot silver will average $19 per ounce this year, a 20.1-percent decline on the 2013 average, GFMS Thomson Reuters’ Andrew Leyland said in the group’s interim silver market review

The metal was last at $16.21/16.26 per ounce, up 11 cents on Tuesday’s closing level. It peaked at $22.18 in February while it hit this year’s low of $15.06 earlier in November.

Leyland attributed the decline to falling physical demand, which it sees down 6.7 percent this year after a weak first half for many sectors.

In Europe, a harmonisation of sales tax rates in January 2014 made silver significantly more expensive for retail investors and led to lower sales until the recent price declines.

Elsewhere, there were modest declines in industrial usage, down 1.8 percent, jewellery, down -4.4 percent, and silverware, down -6.3 percent – thrifting away from silver continues in electronics and some retailers pushed gold jewellery products this year to take advantage of lower prices, GFMS Thomson Reuters said.

Still, demand for silver bars and coins has soared in recent weeks after bargain-hunting retail investors returned to the silver market, it added.

Indian imports of silver are up by 14 percent in January-October on the same period of last year and set for an annual record. With imports in the first 10 months totalling a massive 169 million ounces, many vaults in the UK, traditionally the largest supplier to India, have seen significant drawdowns, leading to more supply flowing from China and Russia, Leyland said.

(Editing by Mark Shaw)

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Gold poised to retest $1,200 again ahead of vital Fed minutes

Otmane El Rhazi from The Bullion Desk.

The gold price is once again poised to retest $1,200 while the market readies for the release of the minutes of the last FOMC meeting, which will be scrutinised for hints on the timing of US interest-rate rises.

Spot gold was last at $1,198.20/1,199.00 per ounce in Wednesday mid-morning trading, up $3.80 on the previous session’s close. It hit a session high of $1,201.40 earlier but for the second time in two days was unable to hold above $1,200.

Should the US Federal Reserve, which is largely seen raising rates in mid-2015, adopt in hawkish tone in the minutes in line with the strengthening US economy, the dollar is likely to strengthen and gold’s credentials as a safe-haven asset would be dampened.

But the dovish tone of the previous statement pushed gold around one percent higher, revealing that US central bankers were concerned about the rising dollar, slack in the labour market, inflation and the negative economic situation in Asia and Europe.

“Gold is historically sensitive to changes in monetary policy expectations. A drop in the phrase ‘considerable time’ by the Fed would be viewed as negative for the bullion market,” HSBC analyst James Steel said, although he added that it could be argued that a shift in the Fed policy is already largely priced in.

Higher interest rates will have a negative effect on the gold market, pushing investors to yield-bearing assets such as equities and bonds.

Elsewhere, the results of a second Swiss TV poll on the ‘Save our Swiss Gold’ initiative could be announced today, results of which will have implications on the gold market.

“We’ve held the view that the probability of the initiative passing is low and that this is likely to be reflected in the opinion polls leading up to the November 30 vote as the public becomes more informed of the issues,” UBS’ Edel Tully said.

“Higher-than-expected support for the initiative could potentially make investors uneasy – although not our base case, we have flagged that a surprise yes-vote would act as a significant tailwind for gold,” she added.

This morning, the EU current account at 30 billion euros beat the forecast 21.3 billion euros. From the US, building permits, housing starts and crude oil inventories are still to come.

Japan’s central bank said it will maintain its current monetary policies despite the country slipping back into recession last week, claiming that its economy continues to “recover moderately”.

There is growing speculation that India may tighten gold import restrictions from today to tackle its ballooning current account deficit.

Higher restrictions will have downside risks for gold, although some investors see this as an opportunity to invest in silver – Indian consumers may turn to other precious metals to meet jewellery demand.

Silver continues to perform well – it was last nine cents higher at $16.19/16.24 per ounce and looking to build a base above $16. Platinum at $1,203/1,208 was up $8 and palladium edged $1 higher to $770/775

(Editing by Mark Shaw)

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Gold price retakes $1,200 after Japan PM calls for election

Otmane El Rhazi from The Bullion Desk.

The gold price has broken above the all-important psychological level of $1,200 after Japanese Prime Minister Shinzo Abe called a snap election.

Spot gold was last at $1,202.50/1,203.20 per ounce, up $17 on Monday’s close, following a surge during early morning London trading on Tuesday and extending higher after Abe said he would will dissolve the Japanese government and set a December 21 election date.

Abe ordered his ministers to start preparing a new economic stimulus package. He delayed by 18 months the sales tax rise that had been planned for October 2015 – this comes just two days after data showed that the Japanese economy has fallen back into recession for the fourth time since the financial crisis.

In currencies, the dollar is showing signs of a pulling back marginally, with the yen up 0.30 against the dollar at 116.91 and at 1.2490 against the euro, pushing investors towards the gold market.

But talks between the Indian government and the Reserve Bank of India on a possible tightening of regulations governing gold imports could cap any rises in gold.

“The Reserve Bank of India had already spoken out strongly in favour of new measures after the value of gold imports in October soared by 280 percent year-on-year to $4.2 billion,” Commerzbank said in a note. “That said, this is partly due to a base effect.”

“Any further limitation of gold imports would probably also lead to increased smuggling, which cannot be the Indian government’s intention. In addition, Indian jewellery retailers could increasingly resort to silver,” it added.

Above $1,200 lies strong resistance at the September low of $1,204, a break of which would be crucial to creating a more stable floor.

In data released this morning, German ZEW economic sentiment at 11.5 was stronger than expected and the general eurozone ZEW number at 11.0 also beat forecasts.

Later today, the market will await PPI numbers out of the US, as well as the NAHB housing market index.

In ETF news, SPDR gold holdings rose for first time on a month, up 2.39 tonnes to 723.01 tonnes, following strong outflows over the past week.

In the other metals, silver is also performing well on the news out of Japan and the potential for new restrictions on gold imports in India. It was last 20 cents higher at $16.30/16.35 per ounce, having spiked below $16 earlier this morning.

Platinum at $1,208/1,213 per ounce was $12 higher while palladium was up $6 at $770/776.

(Editing by Mark Shaw)

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Iran Gold: Launches Biggest Processing Plant In Middle East – IB TIMES

Otmane El Rhazi from The Bullion Desk.

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Gold price holds two-week high, move towards $1,200 possible

Otmane El Rhazi from The Bullion Desk.

The gold price hit its highest in more than two weeks on Monday morning on short-covering and the unexpected announcement that Japan has slipped back into recession.

The spot gold price was last at $1,186.60/1,187.40 per ounce, down $2 on Friday’s close but up significantly from last week following a rally on Friday afternoon from a low of $1,146.90. It peaked at $1,195.50 earlier this morning.

The rally was spurred by large short covering on a weaker dollar, which dropped as low as low as 1.2577 against the euro at one point before recovering to 1.2498. Should the dollar show further signs of weakness early this week, gold could move towards $1,200, with resistance forming around $1,192.

“We wait to see if the rallies are sold into, which would show underlying sentiment remains bearish, or whether there is further short-covering. Given the speed of the moves, we would not be surprised by more short-covering – many of the shorts, who must be sitting on significant profits, may be worried about seeing those disappear,” FastMarkets analyst William Adams said.

Physical demand has also slightly improved, particularly in China, with premiums on the Shanghai Gold Exchange up to around $1 over spot from level last week.

“Although the physical market has responded to a lower price environment, demand has not been sufficient to stem the tide of disinvestment,” Barclays said in a note. “ETP physical holdings are now at September 2009 lows, while gross shorts are the highest since July 2013.

“Should physical demand provide a firmer-than-expected floor, prices could be subject to a short-covering rally. Given our macro forecast, we would view these rallies as an opportunity to short gold,” it added.

Also providing support for safe-haven assets is Japan’s return to recession for the fourth time since the financial crisis, with quarterly preliminary GDP at -0.4 percent against a median reading of 0.5 percent.

Japanese Prime Minister Shinzo Abe may call for an early snap election next month, which raises the likelihood that Tokyo will delay a second increase to the sales tax that was on the slate for next October.

Data today is unlikely to add any real volatility to the market. Already, the Italian trade balance undershot at 2.01 billion euros, with the eurozone trade balance, monthly Buba report and a speech from ECB president Mario Draghi to come.

Out of the US today, the Empire State manufacturing index, capacity utilisation rate and monthly industrial production figures will be eyed.

In the other metals, silver followed gold on Friday afternoon, surging as much as 4.3 percent, but it was last 15 cents lower at $16.14/16.19 per ounce,

The PGMs were steadier – platinum at $1,202/1,207 was $6 lower while palladium at $762/768 is up $4.

“We are surprised that the PGMs did not follow bullion prices more – we still feel they are oversold so there may well be room for them to play catch-up,” FastMarkets analyst William Adams added.

(Editing by Mark Shaw)

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GOLD WEBCAST – Gold prices improve as punchy ECB data bolsters outlook

Otmane El Rhazi from The Bullion Desk.

The gold price handed back some of the gains made in previous sessions on Friday, but is performing well on tentative signs that eurozone economies are turning a corner French third-quarter preliminary GDP rose to 0.3 percent, better than the expected 0.1-percent rise and the previous quarter’s revised -0.1 percent, but non-farm payrolls were down 0.2 percent. German preliminary GDP came in as expected at 0.1 percent. This could alter the perception that the European Central Bank was readying a full-fledged quantitative easing programme next month to prop up the ailing eurozone economy. In other data today, more disappointing data out of China will put pressure on the Chinese government to introduce further stimulus measures, as the country looks to meet its 7.5-percent target for annual GDP growth.

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Anxious gold bugs swarm Switzerland’s central bank – FT

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Modi effect on gold market ‘remarkably impressive’ – WGC’s Hewitt

Otmane El Rhazi from The Bullion Desk.

Prime Minister Narendra Modi’s government has had a “remarkably impressive” effect on consumer confidence in buying gold since it coming to power earlier this year, World Gold Council head of intelligence Alistair Hewitt said.

He expects this trend to continue given the improving Indian economy despite the Bharatiya Janata Party’s failure to lift restrictions aimed at curbing gold imports as had widely been expected, he told FastMarkets.

“One of the most striking features about the Indian gold market has been the economic confidence of Indian consumers,” Hewitt said. “[Indian buying] has been so important for the market for the last 20 years – I don’t see that changing any time soon.”

In data this week, Indian industrial output in September climbed to a to a three-month high of 2.5 percent, up from 0.5 percent in August and beating the forecast 0.6 percent.

The Organisation for Economic Co-operation and Development recently lowered its growth forecast for India to 5.4 percent from 5.7 percent for this year but it expects expansion of 6.4 percent next year, having pegged it at 5.9 percent just two months ago.

And the S&P BSE Sensex, a stock market index that tracks the performance of the 30 largest stocks on the Bombay Stock Exchange, has rallied by 30 percent since the start of the year.

Growing confidence in the country’s economic performance lifted Indian gold demand in the third quarter of this year 60 percent to 183 tonnes, the WGC said, although the year-ago figure may have been distorted by import restrictions and higher duties imposed by the government that discouraged buying.

Indeed, contrary to expectations, Modi has maintained India’s strict 10-percent import tariffs on gold as well as the rule that makes it mandatory for trading agencies to export 20 percent of imported goods.

This comes despite calls from some quarters on the Indian Finance Ministry to loosen the curbs, which New Delhi introduced to narrow the country’s ballooning current account deficit (CAD) – it hit $87.8 billion in the 2012-2013 fiscal year.

The CAD narrowed to $7.8 billion in the three months to June 30 from $21.8 billion a year previously, which the Reserve Bank of India attributed largely to a rise in the import duty to 10 percent and a rule requiring 20 percent of all bullion imports be re-exported.

But the festival-related surge in gold imports in September has pushed the country’s trade deficit out to $14.25 billion from $10.84 billion in August, making an easing or a withdrawal of the rules unlikely.

In contrast, China’s “pro-gold policies” are one of three factors supporting domestic demand for the metal alongside rising incomes and “the cultural significance of gold with Chinese people” Hewitt said.

Despite a 39-percent drop in jewellery sales in China in the third quarter of the year to 147 tonnes, Hewitt believes that confidence in buying at the consumer level is as strong as ever.

Year-on-year comparisons are complicated by last year’s “exceptional market”, he added, describing the surge in imports to a reported 1,108 tonnes as “a once-in-a-generation event”.

Still, he acknowledged the Chinese market is likely to remain well supplied after last year’s exceptional intake.

Chinese imports of gold from Hong Kong were a net 61.7 tonnes in September, more than double the total in the previous month and the highest since March, according to Hong Kong government figures.

Mainland China imported 25.6 tonnes in August but had brought in 109.4 tonnes in September 2013.

(Editing by Mark Shaw)

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Global Demand for Gold Falls – WSJ

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Gold price slips but improved ECB data bodes well

Otmane El Rhazi from The Bullion Desk.

The gold price handed back some of the gains made in previous sessions on Friday but tentative signs that eurozone economies are turning a corner has provided some cheer.

Spot gold was last at $1,154.40/1,55.20 per ounce, down $5.70 on Thursday’s close and trading within a $13 intraday range.

French third-quarter preliminary GDP rose to 0.3 percent, better than the expected 0.1-percent rise and the previous quarter’s revised -0.1 percent, but non-farm payrolls were down 0.2 percent. German preliminary GDP came in as expected at 0.1 percent.

The final CPI for the eurozone was as expected at 0.4 percent, unchanged from last year, while the flash GDP was up 0.2 percent from last quarter’s 0.1 percent. Final core CPI was as forecast 0.7 percent, unchanged from the previous quarter.

This could alter the perception that the European Central Bank was readying a full-fledged quantitative easing programme next month to prop up the ailing eurozone economy.

A move away from QE would signal that the euro is improving and thus could shave some of the strength from the dollar and ultimately improve gold prices. The euro was last at 1.2458 against the dollar.

“Signs of renewed growth in the eurozone – it has potentially turned a corner – backs up the ECBs’ decision to await the results from its LTRO and ABS programme before considering implementing a full QE programme, as had been increasingly expected,” FastMarkets analyst Tom Moore said.

“This indication of renewed strength and lower QE potential is likely to reduce the US dollar’s upside momentum, bolstering precious metal prices,” he added.

In other data today, more disappointing data out of China will put pressure on the Chinese government to introduce further stimulus measures, as the country looks to meet its 7.5-percent target for annual GDP growth.

This morning, Chinese new loans at 548 billion yuan missed the forecast 615 billion yuan while M2 money supply grew 12.6 percent from a year earlier, missing the 12.9-percent estimate.

“The falls in Chinese new loans and M2 money supply signals that the Chinese central bank’s recent liquidity injections have not reached the real economy,” Moore said.

Later today, the market will eye retail sales, consumer sentiment and import price data out of the US.

In the other metals, silver was 19 cents lower at $15.39/15.44 per ounce, platinum edged $2 higher to $1,192/1,197 and palladium at $765/770 was up $3.

(Editing by Mark Shaw)

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Gold demand in China stagnant, imports shackled despite lower prices

Otmane El Rhazi from The Bullion Desk.

Physical gold premiums in Shanghai remain flat while Chinese demand is significantly weaker than expected, sources told FastMarkets.

With spot gold on international markets at $1,162.10/1,162.90 per ounce, near the April 2010 hit last week and down significantly from its 2014 peak of $1,388, many had expected China, the world’s largest consumer of gold last year, to return to the market in force to pick up metal at bargain prices.

But spot premiums on the Shanghai Gold Exchange SGE are now at $1 over spot for 1kg bars, having fallen from as much as $6 at the start of October, although up from level last week.

A price nearer $1,100 would be needed to really spur buying and push up SGE premiums, sources suggested last week.

A continued clampdown on commodity imports for the purpose of financing has choked off local demand, they said this week.

“Instead of borrowing Renminbi, it was much cheaper to borrow on a commodity such as gold, which explains the large imports, but a clampdown this year has really affected that,” one source said.

After imports into China last year of 1,108 tonnes, the physical market is amply supplied, with imports for 2014 expected to be lower.

Chinese jewellery demand fell 39 percent year-on-year in the third quarter to 147 tonnes, the World Gold Council (WGC) said, although this remains broadly in line with the five-year average of 154.9 tonnes.

In India, premiums have remained high, with buying for the wedding season moving into full-flow. Premiums in Mumbai were quoted around $18 over spot for 1kg bars, unchanged from the previous two weeks, which suggests solid demand.

Indian demand in the third quarter rose 60 percent 183 tonnes, the WGC said, although the year-ago figure may have been distorted by import restrictions and higher duties imposed by the government that discouraged buying.

India’s gold imports in October were again higher than this year’s average at around 70-80 tonnes, sources suggested, albeit below the September total of 120-130 tonnes.

October’s higher imports were a knee-jerk reaction to the traditional buying ahead of Diwali but also because the government is apparently looking to tighten import restrictions once more, sources suggested.

This comes despite calls from some quarters on the Indian Finance Ministry to loosen the import curbs, which New Delhi introduced to narrow the country’s ballooning current account deficit (CAD) – it hit $87.8 billion in the 2012-2013 fiscal year.

The CAD narrowed to $7.8 billion in the three months to June 30 from $21.8 billion a year previously, which the Reserve Bank of India attributed largely to a rise in the import duty to 10 percent and a rule requiring 20 percent of all bullion imports be re-exported.

But the festival-related surge in gold imports in September has pushed the country’s trade deficit out to $14.25 billion from $10.84 billion in August, making an easing or a withdrawal of the rules unlikely – despite the general consensus that Prime Minister Narendra Modi would do so when he took office earlier this year given his pro-business stance.

In other locations, the Hong Kong rate is down fractionally at $1.10-1.20, Singapore was also lower at $1.20-1.50 and Dubai retraced to $1.

(Editing by Mark Shaw)

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Gold price rangebound, poised to rise on emerging dollar weakness

Otmane El Rhazi from The Bullion Desk.

The gold price traded sideways on Thursday morning after the release of further disappointing Chinese data that is likely to fuel debate over the pace of growth there.

Spot gold was last at $1,160.00/1,160.80 per ounce, up $1.70 on Wednesday’s close and down just $10 since the start of the week.

“The precious metals are consolidating,” FastMarkets analyst William Adams said. “There is underlying buying around but a lack of follow-through buying interest means the shorts seem prepared to wait for lower prices so although there is potential for short-covering it is not being seen yet. The markets remain vulnerable.”

In data released earlier today, Chinese industrial production at 7.7 percent undershot the forecast 8.0 percent, while fixed asset investment and retail sales were also slightly worse than expected and their restive previous readings.

This suggests the liquidity injections into the banking system in September and October totalling around $125 billion have yet to reach the grass roots of the economy. The PBoC’s stimulus aimed to reinvigorate an economy that looks increasingly in danger of missing the government’s GDP growth target of 7.5 percent for the year.

The dollar, which was last at 1.2464 against the euro, is strong while there is growing speculation that the ECB, the only major central bank not to have gone down the route of quantitative easing, may introduce fresh easing measures to kick-start the bloc’s stumbling economy.

Frontline EU numbers expected on Friday will be closely watched for how they may sway ECB president Marion Draghi’s thinking before next month’s meeting.

Still, technical weakness is starting to build up in the greenback, which could provide a boost for gold in its attempts to tackle resistance at $1,180, FastMarkets analyst Tom Moore believes.

“Gold’s upside potential is on two fronts. The GOFO has fallen into backwardation, tightening up physical supply, and the dollar continues to look overbought, with a potential head-and-shoulders reversal pattern making a pullback in the dollar index to around 86 highly probable,” he said.

“Both of these factors highlight the potential for gold to break back higher and challenge resistance from its previous double bottom at $1,180,” he added.

In other data today, Japanese revised industrial production improved at 2.9 percent, while in the eurozone the German final CPI was flat at -0.3 percent and the French number improved to 0.0 percent.

The ECB monthly bulletin, US unemployment claims, Jolts job openings, crude oil inventories and the Federal budget balance are due, as is a speech from Federal Reserve chair Janet Yellen.

In the other metals, silver was last 11 cents higher at $15.70/15.76 per ounce, while platinum at $1,202/1,207 was up $7 and palladium edged $2 higher to $773/779.

(Editing by Mark Shaw)

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Russia buys 55 tns of gold in Q3, central banks seek protection – WGC

Otmane El Rhazi from The Bullion Desk.

Russia added 55 tonnes of gold to its reserves in the third quarter of this year, the World Gold Council (WGC) said in its latest Gold Demand Trends report, to firm up the rouble during an economic war with Western states that has battered the Russian currency.

Russian central bank gold reserves of 2,435.40 tonnes, according to the WGC’s November statistics, account for around 10 percent of its assets.

The news comes amid a sharp decline in the rouble – down more than 25 percent against the dollar this year, hitting an all-time low at 48.60 – after western countries imposed economic sanctions on Russia following its support of separatists in Ukraine.

The slump in oil prices to around $80 per barrel from nearer $110 at the start of the year has weighed in particular. Western sanctions have deliberately targeted the oil and gas industries, which account for upwards of 40 percent of the Russian government’s income.

Kazakhstan added 28 tonnes and Azerbaijan seven tonnes to their reserves in the third quarter, the WGC also said.

Central banks have been looking to shore up their currencies with physical assets that hold high value, buying 93 tonnes of gold in the last quarter, down nine percent year-on-year but the 15th consecutive quarter where they remained net buyers.

Total supply for the quarter fell seven percent to 1,048 tonnes, with mine supply up one percent but the gold recycling rate falling to its lowest since 2007.

Third-quarter gold demand fell two percent year-on-year to 929 tonnes. Overall gold demand remained subdued but the decline was less severe than the second quarter’s 16-percent drop.

In value terms, third-quarter gold demand of $2.3 billion was down six percent on a year ago.

Spot gold is near four-year lows at $1,160.00/1,160.80 per ounce, down from a peak of $1,388.20 in March.

(Editing by Mark Shaw)

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Miners priced at near-death experience with gold at a landmark – FT

Otmane El Rhazi from The Bullion Desk.

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ICE ‘clear favourite’ for gold fix in LBMA survey

Otmane El Rhazi from The Bullion Desk.

Intercontinental Exchange (ICE) was the clear favourite among LBMA participants to administrate the new gold price benchmarking process, according to consultation feedback at the LBMA conference in Lima seen by FastMarkets.

Bids from the LME and CME/Thomson Reuters were neck-and-neck for second place, with Electronic Broking Services (EBS), a wholesale electronic trading platform owned by ICAP, and Autilla/Sapient further down the field.

The survey showed that LBMA’s members clearly favoured the ICE’s ICE Benchmark Administration (IBA), an independent specialist benchmark administrator, primarily for its regulatory aspects. Its scores in technology, benchmark price mechanism, independence, documentation and regulation were comfortably ahead of its rivals.

While those LBMA members that participated in the phase-one selection process marked ICE highly in several fields, the CME/Thomson Reuters system scored consistently across the board but enjoyed no clear prominence in any of the categories on which members were asked to rank the platforms.

The LME outperformed the other systems on long-term costs and fared well on FX options but received the lowest ranking in independence.

Autilla’s system, in conjunction with Sapient, fared well across the board but fell short on feasibility of timing, documentation and FX options. And EBS was similarly well received but was perceived to be weaker in the fields of regulation, its benchmarking mechanism, short-term costs and, most prominently, the platform itself.

The twice-daily gold fix, which has been in operation since September 12, 1919, has come under increased regulatory and media scrutiny. While there have not been any findings of wrongdoing, a third-party operator is seen as a critical step in modernising the image of the benchmark process, while also providing enhanced transparency and compliance with legislation.

IBA will provide the price platform, methodology and overall administration and governance for the LBMA gold price. Its new mechanism is going through into a testing phase with the LBMA before going live some time in the first quarter of 2015.

Via IBA, ICE has administered LIBOR as of February this year and will handle ISDAFIX in future, which is already IOSCO-compliant. Some market participants stressed the importance of this in the eyes of both the LBMA and the UK’s Financial Conduct Authority (FCA), the UK regulator.

(Editing by Mark Shaw)

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BULLION MORNING – Gold price holds gains, fund outflows continue

Otmane El Rhazi from The Bullion Desk.

The gold price has held onto gains made overnight on Wednesday morning but it continues to look vulnerable to a resumption of the downward trend given near-two-year highs in the dollar and strong outflows from gold ETFs.

Spot gold was last at $1,163.00/1,163.80 per ounce, up $2 on Tuesday’s close and trading within a $9 intraday range.

Sentiment has picked up tentatively after the metals became oversold, with the next big resistance level forming at the previous breakout point of $1,180. US data later this week could push prices back towards this level if the numbers fall short of forecasts.

US wholesale inventories are due later today before unemployment claims, Jolts job openings and the Federal budget balance on Thursday and retail sales, import prices, business inventories and UOM preliminary consumer sentiment and inflation expectations on Friday.

“The precious metals rebounded strongly on Friday and consolidated on Monday and early Tuesday. They now look well placed to edge higher again,” FastMarkets analyst William Adams said. If there is enough buying to chase prices higher, fund short-covering could lead to improved momentum. Still, sentiment largely remains negative so volatility is to be expected.”

The dollar was last at 1.2460 against the euro, up 0.15 cents on growing speculation that the ECB – the only major central bank not to have gone done the route of quantitative easing – may introduce fresh easing measures to kick-start the bloc’s stumbling economy.

This brings the German consumer price index on Thursday and above all the German and eurozone GDP numbers on Friday sharply into focus after today’s eurozone industrial production for September was as forecast at 0.6 percent, a solid rebound from -1.4 percent in the previous month.

Outflows from gold-backed exchange-traded funds continue while investors seek better returns elsewhere. Today, holdings in the SPDR fund, the world’s largest gold-backed fund, hit a fresh six-year low, the sixth straight day of outflows, with total holdings now at 724.46 tonnes.

Equities have been performing well in recent sessions, particularly in Asia this morning, with the Nikkei and Hang Seng both currently up at 0.43 and 0.55 percent respectively.

Helping to buoy the markets are reports that Japanese Prime Minister Shinzo Abe may call for an early snap election next month, which raises the likelihood that Tokyo will delay a second increase to the sales tax that was on the slate for next October.

Chinese fixed asset investment, retail sales and industrial production, due for release tomorrow, should provide an indication on the strength of its economy.

In the other metals, silver was three cents lower at $15.63/15.68 per ounce, while platinum at $1,201/1,206 was up $4 and palladium at $772/778 was up $6.

(Editing by Mark Shaw)

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India gold imports to rise into 2015 – Scotia-Mocatta

Otmane El Rhazi from The Bullion Desk.

Gold imports into India have returned to more normal levels and could climb higher in 2015 amid tepid bullion prices and improved domestic economic conditions, Sunil Kashyap, Bank of Scotia-Mocatta managing director, said at the London Bullion Market Association (LBMA) conference held in Lima.

Last year began normally, demand was stable and imports were coming in at around 50-60 tonnes per month. Then the Indian government introduced a slew of measures, starting with custom duty increases from 2 to 10 percent of the value of gold.

In July 2013, the Reserve Bank of India implemented the controversial so-called 20:80 scheme in an attempt to control the escalating current account deficit and stabilise the rupee. Under the rule, every importer had to ensure that 20 percent of all th gold brought into the country would be made exclusively available for export.

“These measures led to a sharp decline in official imports – they fell to 5 tonnes in September. Once the market got its head around the new policy, imports resumed but only to about 15 tonnes in December,” Kashyap said.

But in 2014 the pace of official imports started to pick up steam. The real turning point came in May when the government increased the number of star trading houses/premier trading houses (PTH) that would be allowed to import gold.

Over the last three months, imports increased to an average of 60-70 tonnes per month. And even when accounting for the 20:80 rule, net imports into India are running at about 40-50 tonnes per month.

“We’re now now seeing regular imports of gold,” Kashyap said. “This has led to much more availability in the market – premiums have fallen from $50-$100 to $5-$10.”

Meanwhile, domestic Indian gold demand next year will hinge on two factors. The first will be price, which has been falling over the past several months.

Gold futures on the Comex division of the New York Mercantile Exchange closed Tuesday at $1,163.00 an ounce, which is about $225 below the February high.

“Most people see the price going lower, so the expectation is that demand will improve,” Kashyap said.

The second driver for demand growth will be the macroeconomic conditions inside India, which have improved significantly since Prime Minister Narendra Modi took office in May.

“The currency has been more stable, trading in a range of about 2 percent this year compared to a range of 10-15 percent last year. Inflation in September was at a five year low of 3 percent, while the stock market reached record highs this week,” Kashyap said.

“If these trends continues, it will free up disposable income, some of which go to gold and jewellery,” he added.

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