Gold drops on Goldman Sach's, Indian premium up

April 16, 2014 at 05:45


This time last year, gold prices had corrected sharply, following investment bank Goldman saying it had a bearish outlook on the commodity. At that time, prices had fallen from $1,600/oz to $1,300/oz in only a few days. Exactly a year later, gold prices again fell sharply in the foreign market—from $1,330/oz to $1,290/oz—in just a few hours. Again, it was Goldman Sachs that came up with a bearish outlook—it said the metal would hit $1,050/oz by the year-end. Tuesday’s fall, however, wasn’t reflected in the Indian market, as spot prices in Mumbai closed Rs 200/10g higher at Rs 29,680/10g. A trader said this was because spot premium, earlier quoted at $35, had crossed...

An expert's view on gold

April 16, 2014 at 05:41


Ten years ago GBS was launched on the London Stock Exchange. This was the first Exchange Traded Commodity available in the UK and heralded the start of commodity investing for UK individuals. Today there are now over 300 ETCs listed in the UK. To commemorate this milestone, we asked Nick Brooks, Head of Investment and Product Strategy at ETF Securities, for his thoughts on the outlook for gold. Nick Brooks: For thousands of years, gold has been used as a global currency, a tradable commodity, and an investment. Financial markets developed rapidly during the 1980s and 1990s leaving gold to recede into the background with many investors believing it to be the "asset o...

Miners hit by gold sell-off

April 16, 2014 at 05:39


Traders marked the first anniversary of gold’s biggest rout for three decades with another precious metals sell-off. Gold tumbled 2pc – breaking through the key $1,300 an ounce level at one point – as traders bet that the strengthening US economy would tarnish the yellow metal’s appeal as a safe haven. Silver also lost more than 3pc, taking the precious metal to its lowest level since early February. The fall in gold came a year after it suffered its heaviest two-day plunge since 1983. Like 2013, Tuesday’s drop inevitably proved a drag on shares in companies that dig for the metal. In the FTSE 100, Fresnillo, the Mexican silver and gold producer, slu...

China companies hoard gold for collateral

April 16, 2014 at 05:37


Chinese companies may have accumulated up to 1,000 tonnes of gold for use as collateral in financing deals rather than to meet consumer demand in recent years, a new study says. The report by the WGC said imported bullion was being used “to raise low-cost funds for business investment and speculation”, and was part of the wider growth in shadow banking in China. Other metals, including copper, have been used extensively as collateral by Chinese traders affected by tight credit conditions, raising concerns of a sudden fall in prices should the financing deals unwind. Precious Metals Insight, a consultancy that provided figures for the report, said that by the end of 2...

Gold: In search of a new standard

April 15, 2014 at 08:31


On the morning of September 12 1919, just 10 months after the end of the first world war, bankers at NM Rothschild & Sons in London sat down to calculate a fair price for gold. They had been asked to do this by the Bank of England, which wanted to restore the city’s status as an international finance centre. Sir Brien Cokayne, the BoE’s governor, envisaged “an open market for gold in which not only every seller would know that he would receive the highest price the world could pay but also every buyer would know that he would get his gold as cheaply as the world could supply it”. At 11am that day, Rothschild set a reserve price at £4.92 or $20.67 an ounce. The f...

China Is Losing Its Taste for Gold

April 15, 2014 at 08:25


China's appetite for gold is waning after a decade long buying spree, suppressed by the country's economic slowdown and constrained credit markets. Demand in the world's biggest gold consumer is likely to stay flat in 2014, according to estimates from the World Gold Council. Gold demand in China has expanded every year since 2002, when it declined, according to the industry group, whose forecasts are closely watched in the gold market. Decelerating Chinese gold demand could threaten the recent recovery in gold prices, some investors and analysts say. Gold futures are up 10% year to date, after falling 28% last year, the biggest annual drop since 1981. Unrest in Ukra...

Gold Backwardation: What Does It Mean?

April 14, 2014 at 12:34


If one wants to understand their price evolution. Vulgarization and over-simplification are always dangerous, and there is a risk that some things may be misunderstood. Backwardation and contango are terms used in the futures markets. Backwardation happens when the price of a future contract on a commodity (like gold) is lower than the spot price. In addition, contango happens when the price of a future contract on a commodity is higher than the spot price. Backwardation is the opposite of contango. In a normal situation, the market is in contango for non-perishable commodities to be delivered in the future and that carry storage costs. These costs include storage fees...