Gold and Silver Struggling to Digest Global Events
Commodities / Gold and Silver 2011 Mar 29, 2011 - 08:11 AM GMTBy: Adrian_Ash
THE PRICE OF SILVER and physical gold bars held in a 0.5% range in London dealing on Tuesday, sitting tight above yesterday's 1-week lows against the Dollar as global equities stalled and the US currency rose on the forex market.
Government-bond prices also slipped, and commodity markets lost up to 1%.
London's FTSE100 stock index fell back to 5,900 – a two-year high when reached in late Dec. 2010.
"There's a lot of worries weighing on all market as we near quarter's end," says a London gold dealer in a note.
"It is...a wonder that the generally risk-aware investors in Germany have not strongly come back to the physical gold market," says Heraeus head of sales Wolfgang Wrzesniok-Rossbach in Hanau.
Calling sales of gold bars in Heraeus' domestic market "within the normal scale", even last week's Euro-gold drop to 1-month lows beneath €1000 per ounce "did not rekindle physical demand beyond the normal," he writes in the refining group's latest Precious Metals Weekly.
Despite "dip buying" reported by Asian traders on Tuesday, gold prices moved in a 0.5% range above $1412 per ounce, slipping back as the US Dollar knocked the Euro lower and pushed the British Pound to new two-month lows beneath $1.5950.
That kept the gold price in Sterling above £882 per ounce and helped the Euro price recover to €43,300 per kilo (€1008 per ounce).
Short-term in wholesale gold bar trading, "The clear trend over the past three days has been for lower highs and lower lows," says Japanese conglomerate Mitsui's London team, "but the market feels a bit non-committal at the moment as we attempt to compute everything that is happening in the world."
Syria's prime minister and cabinet today handed their joint resignation to 11-year president Bashar al-Assad following two weeks of anti-government protests that have seen 60 people killed.
Pro-Gaddafi forces meantime pushed rebel Libyan troops back some 30km, while an international conference on continued UN-NATO airstrikes began in London.
Japanese prime minister Naoto Kan told the Tokyo parliament that his government is "in a state of maximum alert" over the ongoing nuclear crisis in earthquake-hit Fukushima prefecture, some 150km away.
The outlook for gold prices "remains overall bullish," writes Axel Rudolph in his latest technical analysis research for Commerzbank clients, pointing next to the "November-to-March resistance line at $1458.50...
"If exceeded, the $1500 region will be in sight longer term."
But "Silver continues to push higher and outperforms other precious metals," says Rudolph, citing "the psychological 40 area" where he would expect the silver price "to lose upside momentum, at least temporarily."
Tuesday's benchmark pricing for wholesale silver was set at $36.62 per ounce at the London Fix – more than 3% off last week's new 31-year high.
Sunday marked the 31st anniversary of "Silver Thursday", when a one-day loss of $1 billion forced Texan oil barons the Hunt brothers to abandon their attempted corner of the entire global market.
Jan. 1980 saw the Hunt brothers holding some 180 million ounces of silver bullion, more than a third of the world's non-government and non-industrial stocks. But sharply rising interest rates, plus a clampdown on their "speculation" by US regulators, found them unable to settle outstanding contracts. They filed for bankruptcy in Sept. 1988.
Last week, according to data from London's VM Group consultancy, silver investment holdings worldwide rose 2.1%, hitting 796 million ounces across exchange-traded funds and derivative products traded in New York.
"Imagine having the entire world speculate on what's going on at one [good-sized] company," says Tom Winmill, president of the Midas group and manager of the $131 million Midas Fund.
"That's what's going on lately in the silver market," Winmill is quoted by Fortune magazine, likening the $27 billion annual output of the global silver mining industry to a publicly-listed firm "such as, say [computer manufacturer] Dell."
Over in base metals, "Falling Chinese property prices, perhaps combined with a government clampdown on alternative sources of funding, would be a devastating outcome for the copper market," says a new report from Standard Bank's commodities team – quoted at length by the FT's Alphaville blog – confirming that property developers in particular have been using deferred-payment purchases of copper to raise fresh loans for re-investment elsewhere in China's fast-growing economy.
"Anecdotally, something in the region of 600,000 million tonnes of refined copper is currently sat in bonded warehouses in Shanghai," says Standard – around two-fifths of China's net annual demand – with up to 80% of that metal bought on letters of credit and used to create a borrowing vehicle enjoying "very attractive" costs amid China's tightening bank lending landscape.
By Adrian Ash
BullionVault.com
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Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.
(c) BullionVault 2011
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