The bull market in gold is a long way from losing both arms and legs just yet…
WHATEVER FORCE you spy behind this week’s swoon in gold prices to $1160 per ounce and lower, ’tis but a scratch – a flesh wound – so far.
“I’ve had worse!” as Monty Python‘s Black Knight says.
First, the current options contract on gold futures expired Wednesday, guaranteeing volatility. Because as bullish speculators moved to close and rollover their position in the derivatives market, those banks taking the other side of the trade were only too happy to oblige.
Call that manipulation if you must (double-check your facts first), but more broadly, long-time investors and traders would always expect to see a seasonal lull – if not drop – in gold prices between July and Sept. India’s gold-hungry millions don’t buy over the summer, waiting instead until autumn’s post-harvest Diwali festival. And after the huge gains spurred by the Greek crisis of April and May, a pullback in gold investment pressure looked due.
Of course, that’s not to say the gold bull-market starting a decade ago hasn’t just met its end. Some in the finance media would like to believe it’s over (even if, like this article at the Sydney Morning Herald, they seem more driven by resentment than analysis). But for now, recent history says the bull market in gold is a long way from losing both arms and legs just yet…
Dropping a little over 9% from last month’s top to date, the gold price in Dollars would have to reach $1073 an ounce before matching the 15% drops of Dec ’09-Jan ’10 and Feb-Apr ’09.
Gold would need to hit $948 an ounce before matching the 25% drop of May-Jun ’06. And it would have to reach $834 before matching the 33% Mar-Sept. loss of 2008.
This current swoon is also a good way from setting new records for pace, too. Top to bottom, it’s nothing – so far – next to the 16% week-on-week drops of June 2006 and Sept. 2008.
Western government deficits are set to keep rising, meantime, while real interest rates remain below zero everywhere, slowly destroying the value of cash. Gold, in contrast, continues to find favor with central-bank reserve managers, and private Chinese gold demand is undimmed.
Indeed, “with all the deregulation we’ve seen in China and the Chinese gold market being so alive, it may just turn out to become a bit of a casino atmosphere over there,” says gold-mining magnate Pierre Lassonde, speaking to MineWeb – “a gambling atmosphere [that] could very well push the gold price beyond anything that we believe is reasonable.”"
Small comfort to investors or traders picking early July’s dip as a bargain, perhaps. But so far, it’s only a scratch. And whatever nemesis gold has stumbled across in July, it’s certainly got nothing to do with the long-term drivers of its four-fold gains to date.
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
THE PRICE OF GOLD held near 3-month lows against all the world’s major currencies on Wednesday in London, recovering little of yesterday’s 2.2% drop.
Soft commodities and base metals rallied from their sell-off, but silver prices held at a 3-session low almost 4% beneath Tuesday’s start, while an early gain faded in European stock markets.
The Euro currency flipped either side of $1.30 to the Dollar. Gold priced in Euros held near €28,800 per kilo – some 15% off its record top of last month.
“Gold was driven down through its long-term bullish trendline as liquidation swept the commodities markets,” says Mitsui’s London dealing desk in its precious-metals note today.
“Physical demand should support here, but with the third quarter largely absent of major gold buying holidays and festivals in physical centres [such as India], the risk remains to the downside.”
In the gold investment market, “Those with weak hands have been, to a large extent, swept away from the market,” counters Société Générale. Analyzing last week’s Commitment of Traders data, the French bank’s analysts note that “at just below 30.5%, the speculative proportion of total open interest [in US gold futures contracts] is at its lowest since the end of 2007.
“This opens the possibility of renewed interest in coming weeks. It also, though, means that the potential for swift short-covering rallies [which would squeeze prices higher] has been reduced.”
Short term, HSBC’s gold analysts say in a note, “With many traders on holiday, and the rollover from the August gold futures to the December futures in full swing, there is…a strong technical element to the recent slide in prices.
“This also has increased the influence of momentum and other technically generated trading,” the bank is quoted by Reuters, “which has tended to favor the downside as the market has weakened. In the near term, this may continue.”
Back in the currency market on Wednesday, the British Pound rose to $1.56 – its best level since mid-Feb. – despite Bank of England governor Mervyn King vowing to keep UK interest rates at historic, near-zero lows for “some considerable distance” into the future.
“Bank balance sheets are still recovering from the current crisis,” he told a parliamentary committee. “The debate is about the appropriate degree of stimulus, not about applying brakes.”
The gold price in Sterling held below £750 an ounce – a level first breached on the way up in February.
“A government whose animating spirit was Lloyd George rather than George Osborne would ask the public to subscribe to a National Recovery Loan of £100bn, to be spent over five years,” writes John Maynard Keynes biographer and Warwick University professor Robert, Lord Skidelsky in the Financial Times today.
“Austerity in the capital budget is the worst possible remedy for a slump,” he says, citing two “big ticket” spending projects announced by London’s previous Labour administration, but now halted by the Tory-LibDem coalition.
The International Monetary Fund meantime warned that China’s property market may be overheating, but signally removed the word “substantially” from its description of the Chinese Yuan as “undervalued” – a move widely seen as political, rather than analytic.
Tuesday saw the Moody’s ratings agency cut its outlook on the Treasury-supported debt of banking giants Wells Fargo, Citibank and Bank of America – plus 10 regional US banks – down to “negative”, citing the Dodd-Frank Wall Street Reform Act.
“The intent of Dodd-Frank is clearly to eliminate government – i.e. taxpayer – support to creditors,” says Sean Jones, head of Moody’s North American bank ratings team.
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
THE PRICE OF GOLD slipped back below $1185 an ounce in London trade on Tuesday morning, holding above yesterday’s 1-week closing low but remaining “directionless” according to one Chinese dealer.
“Investors are unclear about the immediate trend,” agrees Pradeep Unni at Richcomm Global Services in Dubai, telling Reuters that “physical gold buying is only expected to emerge by the end of this month.”
But “Current levels [of physical gold buying] compare well with previous highs reached earlier this year and late-2009,” says Walter de Wet at Standard Bank.
“We expect support from the physical market to increase towards Q4:10. Buying of gold for jewelry demand, especially in India, may increase in August/September.”
On the broader financial markets today, European equities rose to new 10-week highs as Deutsche Bank and UBS both reported stronger-than-expected revenues, and Britain’s BP oil giant slated $30 billion of assets for sale to help fund the Gulf of Mexico clean-up.
All major commodities rose in price, with US crude oil contracts gaining above $79 per barrel and silver prices rising to $18.30 an ounce.
The 16-nation Eurozone meantime reported the first growth in the currency union’s money supply since October, with June’s 0.2% increase in the broad M3 measure of money defying analysts’ forecasts of another fall.
The Euro rose above $1.30 for the second time in a week, nudging the gold price in Euros back down to last Monday’s 3-month low beneath €29,200 per kilo.
All major currencies bar the Japanese Yen rose vs. the Dollar, in fact, with the British Pound hitting a new 6-month high that squashed gold to fresh 13-week lows near £762 an ounce.
Spot gold prices for UK investors have now slid 12.5% from last month’s all-time peak.
“Gold cannot really be in a bubble when a BCA report is featured in Barron’s telling people to bail – bubbles usually involve universal love,” says David Rosenberg, chief economist and strategist at Canadian asset managers Gluskin Sheff.
“Besides gold, the big surprise for the year is that we are seven months into it and the bond market has smoked equities in terms of generating a total return for investors – and with a lot less volatility.
Long-dated zero-coupon bonds have gained 21% so far in 2010, Rosenberg notes. “And yet the typical institutional investor right now is sitting 68% in equities!”
G7 government bonds slipped again on Tuesday, pushing the yield offered by 10-year US Treasuries further above 3.0%.
Two-year German Schatz bonds offered 0.87% per year by lunchtime in Frankfurt.
Consumer prices rose 0.9% last month from June 2009, according to Germany’s federal statistics office.
“Gold investors enjoy no income on coins or bars, and have to pay the costs of storage and protection,” says John Redwood, UK Conservative MP and chairman of the Evercore Pan Asset investment advisory, quoted by InvestmentWeek.
“[But] it appears rising Asia likes the shine of special metal, as well as some rich Westerners, and this is adding to the speculative attraction.”
“The key factors that have been driving gold investment demand are likely to persist,” says Evy Hambro, manager of the $3.9bn BlackRock Gold & General fund.
“Positive long-term factors, including falling mine supply and the potential for a reduction in net central-bank sales, will all be supportive of prices. Indeed, central banks may even become net buyers of gold.”
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
So this is the most expensive iPhone on the planet! Dubbed the ‘Kings Button’ this 3G iPhone is made of 18 carat yellow gold, white gold and rose gold and is encrusted with 138 diamonds and a staggering 6.6 carat diamond which acts as the home button! Clearly priced to sell, it costs £1.6 million. The phone was created by designer jeweller Peter Aloisson, who is famous for customising phones with diamonds and precious metals, as well as redesigning household goods.
Earlier this year British film archivists released footage which apparently shows the world’s first mobile phone being used – in 1922! And in the last 30 years mobile phones, whether you love them or hate them, have become a fundamental part of human communication. The Motorola’s DynaTAC (Dynamic Adaptive Total Area Coverage) 8000X was the world’s first commercially released mobile phone. Measuring 13 inch x 1.75 inch x 3.5 inch, this mobile phone was released in 1983 with a price tag of £2600:
I am glad I was a mere tadpole in the pond when this brick was in use! One would have needed a handbag the size of a skip to accommodate this phone. Like with most things, you can have the not so nice, the nice, and the most luxurious. At the start of the century Nokia reigned supreme when it came to chic phones. Over the years I managed to work my way through the Nokia 8850 and the 8890, the Nokia 8910i and the Nokia 8800:
These phones were designed to look stylish and they did…they were not the most practical to use (especially if you have long nails), they never boasted the latest technology and they certainly were not cheap on release, but they did look plush and therefore they deserved a place in my handbag. Let me not forget to mention that each of these models have had leading parts in blockbuster films alongside a string of A-listers. Now I have my sights set on more extravagant designs…
Behold! My next phone, another Peter Aloisson creation. Not that I have ever owned or wanted a Motorola, but this one would of course be the exception to the rule. It’s covered in 1200 diamonds and features a keyboard soaked in 18-carat gold, the phone is priced at £28,000 and I am prepared to accept this phone as a gift should someone feel compelled to bestow it upon me ;0). The same applies to this phone:
This absolutely stunning phone is by Vertu, a British based company that specialises in luxury mobile phones. This limited edition model is part of the Constellation Vivre Range and features include red gold, engraved bezel, white diamonds, black ceramic keys and a black embroidered leather. One of the benefits of owning a Vertu mobile is the special concierge button which allows the owner to use the concierge service 24 hours a day to book fine dining and travel whenever they need. Price available on request I believe.
The price of gold gave back an early rally on Monday morning to trade just below Friday’s close of $1190 an ounce amid what one Hong Kong dealer called “a typically slow summer day.”
“There is physical gold buying coming in as prices are below $1200,” said a Seoul-based trader.
“Physical gold demand is supporting the market towards the $1185 level,” said Afshin Nabavi of MKS Finance in Geneva, also speaking to Bloomberg.
“A lot of the interest we are seeing at the moment is from long-term investors, and we don’t see that abating,” the Wall Street Journal quotes Barclays Capital analyst Suki Cooper in London.
Dealing in Asian and European equities was also quiet early Monday, leaving London’s FTSE100 index unchanged from last week’s two-month closing high.
Crude oil slipped from an 11-week high near $79 per barrel. Major-economy government bonds rose, nudging the yield offered by 10-year US debt back below 3.00%.
Platinum and palladium both hit a 5-week high, some 3.6% and 13% higher for 2010-to-date respectively.
Silver prices slipped back from an early repeat of Friday’s one-week high at $18.33 an ounce, but held above $18 an ounce – some 6.6% higher for the year so far – as the start of US dealing approached.
“In technical terms, gold looks bearish,” says Walter de Wet at Standard Bank. “However, in the physical market, buying interest is providing support around this crucial range gold.”
Looking at the latest Commitment of Traders data from the US gold futures market, non-commercial “speculative” players last week cut their bullish position to the equivalent of 639 tonnes net long, de Wet says, “the lowest level since March this year.
“As a percentage of [all] open interest, the non-commercial net long position now stands at 25.5% – the lowest level since Nov 2008. We therefore foresee more gold longs.”
Over on the currency markets on Monday, the Euro held steady against the Dollar around $1.29, but the British Pound jumped once again, challenging 5-month highs above $1.55.
Nomura bank analysts in New York say in a new report that central banks added a record $24.5 billion of “other” currencies to their portfolios between Jan. and April – meaning currencies outside the Dollar, Euro, Sterling or Japanese Yen.
Typically led by the “commodity Dollars” of Canada and Australia, Norway’s “petro” Krone, plus the higher-yielding New Zealand Dollar, these “other” currencies accounted for 3.7% of central-bank reserves worldwide by April, Nomura thinks, up from 1.5% a decade ago.
Gold bullion has gone from 12.2% of central-bank reserves by value in early 2000 to 10.0% in Q1 2010, according to World Gold Council research.
“Current news is not indicating an inflation threat and the sovereign debt-crisis is gradually vanishing from public attention,” says Wolfgang Wrzesniok-Rossbach in his latest Precious Metals Weekly for German refinery Heraeus.
Last week’s upbeat European banking “stress test” results – much-challenged by private-sector analysts – said only 7 out of 91 institutions now need to raise extra capital.
“If the Indian gold merchants also sit back in August, Western investors will again have to get active,” says the Heraeus report. “[But] demand for investment gold bars in mid-Europe in the last ten days has been again at a low level, and the relatively low prices in Euro terms have not had much effect on this.
“Here in Europe, scrap-gold supplies [have] continued to flow at unchanged (robust) levels.”
Today the gold price in Euros bounced higher after re-touching Friday’s 3-session low of €29,500 per kilo, while the price of gold for UK investors fell to its lowest level since late April below £766 an ounce.
Luxembourg’s Commerzbank notes that, on the World Gold Council’s data – compiled by London consultancy GFMS Ltd – the supply of “scrap” gold from unwanted jewelry worldwide fell 43% in the first quarter of this year from the start of 2009, down to 343 tonnes.
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Using the ancient art of laying thin pieces of 24ct. gold on the statue’s surface and color enameling, creates this truly authentic work of art. The statue is in the foyer of an undisclosed client’s home.
Credit deflation just hit the UK for the first time on post-war records…
HMMMM…This looks telling
UK banks will soon be able to post raw loans – rather than securitized loans that have been bundled into asset-backed bonds – as collateral against short-term liquidity aid from the Bank of England.
This will mean lending central-bank cash against the commercial banks’ major assets, as the Old Lady of Threadneedle Street puts it, rather than against that sliver of their balance-sheets held as securitized loans. Which seems prescient, for two reasons.
First, securitization of UK consumer, mortgage and business debt has all but collapsed. Net-net, there haven’t been any sizeable securitizations of UK bank lending for six months running – the longest period since 1998.
The two months before that actually saw securitizations paid back, and at the fastest pace on record, down by £26 billion. Which is a pity for the UK’s formerly go-go-crazy-bones credit bonanza.
In the 10 years ending Dec. 2009, securitization added £325 billion to the growth in UK bank lending, expanding new credit by more than 20%. And why not? Securitizing bank loans, by parceling them up and then selling the debt to investors both foreign and domestic, gave banks the chance to lend the same Pound twice, skimming a profit both times. It also gave insurance and pension funds the chance to invest in Britain’s record debt bubble…a boom which ended with more people working more hours to service more debt than ever before in history.
That bout of collective insanity has now got the DTs. Because second, and as a result of securitization’s collapse (or so we guess here at BullionVault), private-sector UK loan growth overall last quarter did what it’s never done before (not since records began in June 1963, at least) and actually turned negative.
The Bank of England’s decision thus looks timely, if ineffective against the credit deflation already underway.
To repeat: UK bank lending to the private sector has never previously shrunk, not in the 47 years of available data. And lending cash to commercial banks Walter Bagehot-style – albeit by accepting their debtors in turn as collateral, and not charging that “high rate” the 19th-century economist recommended either – is what central bankers are for, after all.
Concluding her 3-month consultation with the banking sector, the Old Lady said Monday that she’ll start accepting “raw loans” as collateral for short-term liquidity, dispensed via the Discount Window Facility, in 2011. That expands the list of eligible collateral which banks can post from securitized debt (those asset-backed bonds accepted since Dec. 2007 on top of government gilts), just so long as the loans are residential or commercial real-estate mortgages, consumer loans (but not including credit cards), or corporate loans to non-bank borrowers.
Unlike the Bank’s failed attempt to inject cash into the UK economy via Quantitative Easing, this latest wheeze to underwrite the credit-supply will at least keep the Old Lady’s cash onshore. Because the raw loan’s end-borrower “must be UK-based.” Which should stop the tabloids screaming about “foreigners stealing” this particular chunk of Britain’s monetary easing when it begins.
Whether it stems the UK’s credit deflation remains to be seen. And whether that deflation ever gets to stem the ongoing inflation in prices still awaits history’s verdict, too. Because while private net lending shrank between April and July, quarterly consumer-price inflation meantime rose to 1.3%, knocking 3.3 pence off the purchasing power of each Pound Sterling compared with 12 months prior.
Deflation in credit but inflation in prices? With the fastest GDP growth in four years coming in at 1.1% at market (i.e. unadjusted) prices across the quarter? Economists from Mervyn “monetarist” King to Paul “Keynes re-born” Krugman say this confluence of pain can never happen. So best wheel out the Bank of England’s printing press yet again, just to get reality back on track with theory.
Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.
Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.
Continuing our gold heist season with the film “Three Kings.” In the aftermath of the Persian Gulf War, 4 soldiers set out to steal gold that was stolen from Kuwait, but they discover people who need their help.
