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The WHOLESALE MARKET gold price fell further on Thursday in London,
hitting its lowest London Gold Fix since 8th July at $1537.50 per ounce
– 19% below Sept's record high – on what dealers called
"long liquidation" and "pressure" from the Eurozone debt
crisis.
New laws in Japan were also blamed for forced sales during Asian trade, with
bullion dealers obliged to report all physical transactions above ¥2
million ($25,600) to the tax authorities starting New Year's Day.
Physical gold bullion flows in Europe are "very light –
unsurprisingly for this time of year," says Swiss refinery and finance
group MKS.
"[A] few accounts [were seen] bailing out on the break of $1570" on
Wednesday, MKS says, with "the rest of the move driven by illiquidity
and forced sellers pushing themselves out as they push [the gold price]
lower."
On a closing-price basis, "Support sits at the trendline
off the October 2008 low, currently at $1543," says Russell Browne's
technical analysis for Scotia Mocatta, pointing to
the uptrend in the gold price starting with the collapse of Lehman Brothers 3
years ago.
That support level is "followed by the September [2011] low around
$1533," reckons Browne.
The Euro sank 1.5¢ on Wednesday after new data showed the European
Central Bank's balance-sheet swelling to €2.7 trillion last week on
making the first of its "unlimited" three-year loan offers to
commercial banks.
Thursday
morning the single currency fell again to a 10-year low against the Japanese
Yen.
"The market reaction is slightly incomprehensible," reckons
economist Jens Kramer at Germany's NordLB in
Hanover. "After that record liquidity injection it would follow that the
balance sheet would swell."
European stock markets crept higher this morning after finishing yesterday
lower, but in the banking sector "The main problem...is not a lack of
liquidity, but a lack of trust," says Commerzbank's Christoph
Rieger, head of fixed-income strategy in Frankfurt.
"There are no central bank tools that would force banks to extend credit
lines among themselves."
"The interbank market remains broken," agrees Richard McGuire at Rabobank's London office, also speaking to Bloomberg.
"The amount of peripheral government debt banks hold
raises questions about counterparty risks."
Pushing higher on its official "benchmark" level again on Thursday,
the interbank lending rate known as LIBOR is now suffering the widest gap
between the lowest and highest interest rates charged since the peak of the
first financial crisis in March 2009.
After Wednesday's surprising low interest rate charged by investors to hold
new short-term Italian debt, the yield demanded on a fresh €7 billion
of 10-year bonds stayed high, just two basis points below the 7.00% level
which analysts believe is "unsustainable".
"We maintain that a liquidity squeeze brought on by the ongoing debt problems in the Eurozone would be one of the
greatest threats to commodities," says Marc Ground at Standard Bank
today.
"Gold, along with the other precious metals, succumbed to the downward
pressure from concerns over Eurozone liquidity."
"Risk-off conditions in the short term are putting pressure on the gold
price," says another London dealer in a note, "but plenty of the
insurance reasons to be long of gold remain in place – and look set to
remain so in January."
Silver prices today flirted with 12-month lows beneath $26.80 per ounce, as
base metals fell with agricultural commodity prices.
US crude oil held just shy of $100 per barrel as the US Navy warned Tehran it
will "not tolerate" any disruption of shipping through the Strait
of Hormuz, which Iran has threatened in retaliation at new international
sanctions.
Ten-year UK government bond yields slipped again below 2.00% – the
record low breached for the first time ever last week.
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