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Gold Bullion Halves Friday's 2.6% Jump as Greece Spurns Troika's 'Debt Drug', China Demand 'Terrific' Ahead of 2015's Late Lunar New Year

Monday, February 2, 2015 8:26

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Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…

GOLD BULLION prices fell Monday in London’s wholesale market, halving Friday’s 2.6% gains to trade below $1270 per ounce – some 7% higher from this time in January.

Asian stock markets closed sharply lower after China showed weaker-than-expected manufacturing activity on new PMI surveys.

European stock markets meantime cut their earlier gains, capping Germany’s Dax below last week’s fresh all-time highs, as Greece’s new finance minister Yanis Varoufakis – flying economy class – continued meeting counterparts in Paris, London and Rome to ask for a renegotiation of Athens’ debt.

Gold bullion priced in Euros fell below €1120 per ounce, a 20-month high when first reached in late January, as the single currency held steady near decade-lows on the FX market.

The final €7.2 billion of the ECB-Eurozone-IMF troika’s €240bn bail-out starting 2010 is due at the end of February.

But while “it’s not that we don’t need the money,” says Varoufakis, “we have resembled drug addicts craving the next dose.

“What this government is all about is ending the addiction.”

“Whether or not Greece ultimately exits the Euro,” says a note from London-based forecasters Capital Economics, “we expect the price of gold to be boosted further this year by the return of safe-haven demand as [that] country’s financial problems drag on.”

“The evidence so far,” says an Asian bullion-dealing desk, pointing to the new Syriza-led government’s cancelled privatizations, re-hiring of public-sector redundancies, and 50% rise in Greece’s minimum wage, “looks as if a full-scale confrontation ahead of February’s bail-out extension is more rather than less likely.

“Expect gold volatility to rise.”

“Gold’s recent price strength,” adds Robin Bhar at French bank and London market maker Societe Generale, “can [also] be attributed to fears of a weaker global economy [and] strong physical demand ahead of the Chinese New Year.”

New data today showed US consumer spending falling at the fastest pace in 5 years at the end of 2014.

Sales of American Eagle gold coins by the US Mint last month fell 11% year-on-year, recording the weakest January – typically a strong month on the issue of a new year’s coin – since 2008.

Manufacturing activity in China – the world’s second-largest consumer market for gold bullion behind India – shrank for a second month running in January according to both the HSBC/Markit and also the China Federation of Logistics’ purchasing managers’ indices.

Sales of gold bullion through the Shanghai Gold Exchange, in contrast, “had another terrific week” notes Jonathan Butler at Japanese conglomerate Mitsubishi.

“The run up to the Chinese New Year is always a busy time for the bullion trade, as this is the main gift-giving period.”

2015′s late start to the lunar New Year, marking the start of the Year of the Goat on February 19, “gives [China's] retailers extra time for a marketing push” Butler adds.

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 and now backed by the mining-sector’s World Gold Council research body – 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.

Source: https://www.bullionvault.com/gold-news/gold-bullion-020220151

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