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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold and Silver Take a Beating from Goldman Sachs

Commodities / Gold and Silver 2013 Apr 11, 2013 - 05:12 PM GMT

By: Adrian_Ash

Commodities

The WHOLESALE PRICE of gold rallied from 1-week lows against the Dollar on Thursday morning, but continued to fall for UK and Euro investors, hitting 4- and 2-month lows respectively.

World stock markets continued to rise, while major government bonds slipped, commodities held flat, and silver bullion rose back above $27.50 per ounce.


"Precious metals took a beating [on Wednesday]," notes Germany's Commerzbank, with gold "leading the way" by falling more than1.5%.

"Goldman Sachs came out with a top trade recommendation to sell Comex gold [futures], which started the move down."

That tip was followed by minutes from the US Federal Reserve's latest policy meeting, released at 9am after being mistakenly shared with lobbyists and lawmakers.

A leaked paper from the European Commission then included a proposal for Cyprus to sell 10 of its 13.9 tonnes in central-bank gold as part of the bankrupt island's €10 billion bail-out program.

"The Cypriot authorities have committed to sell the excess amount of gold reserves owned by the Republic," says the 'template' detailed in the paper.

"This is estimated to generate one-off revenues to the state of €0.4bn via an extraordinary pay-out of central bank profits."

Under the currency union's political treaty, however, central banks must be independent "from Community institutions or bodies, from any government of a Member State or...any other body."

That independence specifically includes not financing state deficits through the sale of central-bank assets – a point stressed by the European Central Bank when it rebuked a 2009 attempt by Silvio Berlusconi's administration to levy a 6% tax on the Banca d'Italia's 2,450-tonne gold bullion reserves.

"No such thing has been discussed or is in the process of being discussed," said Aliki Stylianou, a spokesperson at the Central Bank of Cyprus, to CNBC today.

"There are so many rumors flying about and this is just one of them."

"Ten tonnes of gold [is] not enough to significantly affect the market," adds Swiss refinery and finance group MKS in a note.

But even so, the leaked plan "has been a psychological blow to the market," counters James Steel at London market-maker HSBC, quoted by the Financial Times.

"The gold price has taken a pretty hard tumble."

Yesterday's minutes from the US Fed's mid-March policy meeting – where both interest rates and bond-buying levels were left unchanged – meantime revealed that "a few participants" would like to end its asset-purchase scheme "relatively soon."

Other attendees – again un-named, with their voting status left unclear – felt that "economic conditions would likely justify continuing the [quantitative easing] program at its current pace at least until late in the year."

"Many participants [however] emphasized" the need to see strong, sustainable improvement in the US labor market before the current $85 billion-per-month is reduced.

Today in Tokyo, new Bank of Japan governor Haruhiko Kuroda – who last week launched $1.4 trillion in QE over the next 2 years – tempered his previous comments by saying the central bank will treat its 2% annual inflation target "flexibly".

"If there is any serious asset market bubble appearing or approaching, of course we will take necessary measures," Kuroda told the FT in an interview.

The People's Bank of China meanwhile said this morning that its foreign exchange reserves grew 3.8% in the first 3 months of this year – the fastest pace in nearly 2 years – to hit fresh all-time records above $3.4 trillion.

"[We're seeing] an even greater demand for gold by China during price pullbacks, aside from the general uptrend," says a note from Mike Dragosits at TD Securities in Toronto, commenting on Wednesday's new gold import figures.

"China's demand for gold has not wavered in the face of all the negativity in the market surrounding the end to the gold bull run."

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

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 2013

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.

Adrian Ash Archive

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