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London Gold Market Report
WHOLESALE bullion fell
hard in early London trade on Thursday, with the gold price dipping to nearly
its lowest level in 2012 as world stock markets and commodity prices also
fell.
India's jewelry sector remained on strike in protest
at last week's doubling of import duties, and "with physical demand not
at full strength and waning investor enthusiasm, the potential for further
downside in [the gold price] remains exposed," says today's note from
Standard Bank.
Silver
prices also dropped over 1% in London trade, touching their lowest level
against the US Dollar since Jan. 25th at $31.70 per ounce.
Worse-than-expected
European data was this morning preceded by news that China's manufacturing
activity has now contracted for five months running.
"Shrinking manufacturing activity in March signals slower demand for
resources," notes a column from Thomson-Reuters Breakingviews.
"Strong
imports have heightened the risk of overstocking in precious metals."
Late-January's Chinese New Year – a peak season for consumers to buy
gold – coincided with sharp falls in the volume of bullion being
imported to China from Hong Kong, falls which followed an earlier surge in China's gold imports
during late 2011.
Albert Cheng of global market-development organization the World Gold Council
said earlier in March that Beijing and Shanghai stores had reported
"fantastic" sales over the Lunar New Year,
"completely clear[ing] out the inventory they
had built up."
In the wholesale market, "A lot of people are on the sidelines
at the moment," said Yuichi Ikemizu,
commodities chief in Tokyo for Standard Bank, to Reuters early on Thursday.
"We saw some bearish signs, but the [gold price] seems to be holding
well. The upside at $1,800 is still looking quite heavy, and investors are
waiting for a cue."
"We feel that gold is consolidating and remains vulnerable to the next
leg lower," reckons Russell Browne at Scotia Mocatta,
commenting shortly after Wednesday's US close.
"Silver also continues to consolidate...[in] a
daily downtrend providing near-term resistance around $32.60."
The ratio of silver to gold prices yesterday hit a 1-month high at 51.6. The
Gold/Silver Ratio rises when the gold price outperforms silver, and vice
versa.
Last April the Gold/Silver Ratio hit a 32-year low, with each ounce of gold
equivalent in price to just 30 ozs silver. It
peaked near 85 in the wake of Lehman Brothers' collapse in September 2008.
Early Thursday, "Speculation of reduced demand for raw materials from
China has continued to weigh on risk sentiment," says Swiss refinery and
finance group MKS in a note.
"People are concerned about China's economic growth," Reuters
quotes a Hong Kong bullion dealer.
"If growth slows down and inflation eases, people may choose not to buy
gold."
Following the Chinese news on Thursday, European economic figures also came
in below analyst forecasts, with Germany's manufacturing PMI contracting
faster and Eurozone industrial orders falling 3.3% in January from 12 months
before.
UK retail sales also undershot analysts' predictions, shrinking 0.3% last
month from January.
Crude oil prices meanwhile fell 1% Thursday morning, with Europe' benchmark
Brent price slipping to $122 per barrel after French industry minister Eric Besson said that major G7 governments are considering a
co-ordinated release of emergency stockpiles to push prices down.
A Gallup poll this month found that 85% of US citizens think Washington
"should take immediate actions to try to control the rising price of
gas."
Brent crude hit fresh all-time highs in mid-March for both Eurozone and UK
oil consumers, peaking 3% above the previous all-time high of July '08,
reached two months before the global banking crisis accelerated with the
Lehman Bros. collapse.
"We can reel off a whole load of airlines that are teetering on the
brink or are really gone," said Tim Clark, president of Emirates
Airlines in Dubai, the world's biggest international carrier, to Bloomberg on
Wednesday.
Pointing to record oil prices and a slump in demand, "Roll this forward
to Christmas, and we're going to see [the airline] industry in serious
trouble," says Clark.
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