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Gold Bullion Rallies as Euro Slips, China Eases Monetary Policy, New Greek Government Meets EU & ECB

Wednesday, February 4, 2015 8:12

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

GOLD BULLION prices erased half of yesterday’s 2.3% drop on Wednesday in London, briefly touching $1270 per ounce after China’s central bank eased a key monetary policy tool and new data showed the US adding fewer jobs than expected last month.

The Euro currency meantime halved Tuesday’s jump on the FX market, sparked by rumors of Greece’s new government “backing down” on its aim of renegotiating the bankrupt state’s joint ECB-EU-IMF bail-out.

Athens’ stock market held onto this week’s 16% gains today as Greece’s new prime minister Alexis Tsipras met with – and was led by the hand by – European Commission leader Jean-Claude Juncker in Brussels.

Greece’s new finance minister, Yanis Varoufakis, meantime met European Central Bank president Mario Draghi, calling their talks in Frankfurt “fruitful”.

Broader Eurozone stock markets fell, and gold bullion priced in Euros rose 1.7% from Tuesday’s sudden 2-week low, while US crude oil contracts reversed yesterday’s surge with a 4% plunge.

The People’s Bank of China today cut the reserve ratio requirement for major commercial banks by half-a-percent, meaning they must hold 19.5% of funds in reserve against their liabilities to depositor savers.

The ratio for US commercial banks is 10%.

Today’s PBoC move says Reuters – the first cut to the RRR in two years – could release an extra $1 trillion in new bank lending in China.

Following November’s surprise cut to interest rates, this “isn’t a surprise,” says one London analyst, calling it “consistent with the more accommodative stance being taken” by Beijing as China’s economic data point lower.

New PMI figures today showed China’s services sector slowing its rate of growth in January to the weakest level in 6 months.

Shanghai’s stock market closed the day almost 1% down, but trading volume in Shanghai’s main spot gold contract rose to its highest level in two weeks as prices fell.

Chinese premiums to London quotes – which invite wholesalers to import metal from the world’s main trading hub to its No.2 consumer market – fell from $2 below $1.40 per ounce.

Volume in the main “free trade zone” contract, in contrast, sank 95% from yesterday’s 2-month high. Premiums on those gold bars of 0.999 fineness turned to a discount of $5 per ounce against London quotes.

Back in European trade, major government bonds ticked lower, edging yields upwards for a second day. But Greek 10-year yields slipped 8 basis points to a 2-week low beneath 9.2%.

New data from the private-sector ADP Payrolls service today said the US economy added only 213,000 net jobs in January, some 40,000 below analysts’ consensus forecasts and the weakest growth since August.

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-020420151

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