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Gold Prices Hit $1290 as New Fed Chief Yellen Speaks, India "Recommended" to Ease Import Ban, Cyprus Lifts Exchange Controls

Tuesday, February 11, 2014 8:53

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GOLD PRICES dropped and then made a fresh 12-week high in London on Tuesday, rising to $1290 per ounce as new Federal Reserve chief Janet Yellen made her first public comments in the job before US lawmakers.

World stock markets also rose, as did silver, which re-touched Monday’s 2-week highs at $20.25 per ounce.

Shanghai gold prices earlier rose 0.9% to their own 12-week high in solid trade.

But the premium over London gold bullion delivery on the most active contract eased below $7 per ounce, the 6-week lows seen just before the recent Chinese New Year holidays began on 31st January.

Gold prices “certainly seem to have benefited most from China’s return to the fray,” says David Govett at London brokerage Marex Spectron.

But jewelry and smaller Asian investor demand “will not chase markets higher,” he adds. “If there is no follow-through buying from funds, then producers may well take this opportunity to start selling.”

“We think,” says US commodities and FX brokerage INTL FCStone, “[this] rally could be best explained by perceptions that the Fed might institute a pause in its tapering program if growth conditions in the US continue to deteriorate.”

In remarks prepared for her testimony to the House Financial Services Committee today Yellen used the word “if” four times in two paragraphs on monetary policy.

Repeating the Fed’s position that tapering is “not on a preset course”, Yellen also said that “highly accommodative policy will remain appropriate for a considerable time” after new QE money printing ends.

The Fed has now held US interest rates between 0% and 0.25% for 62 months.

In contrast, “The cost of capital in emerging markets is going up” as the US Fed tapers its QE money-printing, says the Financial Times today, “and as it does so, growth will slow.”

Tuesday saw the National Bank of Kazakhstan devalue its Tenge currency by 18% against the Dollar.

Turkey’s Lira meantime extended its 6% rally from last week’s all-time lows, helping cap rising gold prices for consumers in the world’s fourth largest market.

Former world No.1, India saw gold and silver imports drop by nearly four-fifths last month from January 2013 to $1.7 billion.

Overall, imports of goods fell by 18% while India’s export sales rose 3.8% by Dollar value, the Trade Mininstry said.

Telling reporters that it has “recommended easing curbs on gold imports, prompted by the brighter trade picture,” the Ministry’s data put India’s trade deficit for the current fiscal year (starting April) down by 27% from the same period last year.

Trade minister Anand Sharma today put off a visit to neighboring Pakistan, aimed at improving cross-border trade.

The US government said Monday it’s filing a complaint against India with the World Trade Organization (WTO), demanding that US-made solar panels are allowed into the subcontinent’s huge new energy infrastructure spending.

Cyprus will next week start relaxing exchange controls imposed on bank depositors during the island’s financial crisis of spring 2013, the finance minister said today.

Suggestions that Cyprus should sell €400m of its gold reserves to raise funds coincided with the first gold price crash of spring 2013, when the metal lost 15% in two trading sessions.

Now “Better prospects for the Spanish economy have slowed [scrap] sales of gold,” says Valencia Plaza, reporting the shutdown of leading Spanish gold buyers and retailer Oro Direct.

“Plus, there are fewer gold-owners who haven’t already sold.”

The news follows the 2012 bankruptcy and takeover of US jewelry buyers Cash4gold, and last year’s 98% collapse in the stock-market value of UK pawnbroker Albemarle & Bond.

Source: http://goldnews.bullionvault.com/gold-prices-021120141

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