London Gold Market Report
Gold Dealing "Quiet", ETFs Shrink Ahead of Seasonally Bullish Period
THE PRICE OF PHYSICAL GOLD pushed back up to $959 an ounce Friday lunchtime in London, a little higher for the week as European stock markets touched new 10-month highs and crude oil moved back above $71 a barrel.
Silver broke new two-month highs at $15.00 an ounce. Government bond prices held firm after yesterday's strong auction of 30-year US Treasury debt.
"We're approaching a seasonally bullish time for Gold," notes Colin Abrams at South African news-site MiningMX.com.
"Historically - over decades - there's been a strong tendency for the Gold Price to rally in the six-month period between September and February."
Research from BullionVault published by the Financial Times late last month shows that a summer dip in the Gold Price - followed by strong gains to finish the year higher than it began - has been the most common seasonal pattern since 1969.
Repeated 20 times across the last four decades, this pattern gave UK investors buying the summer low an average 13.7% gain by the following Feb.
"The Gold market is quiet," said Walter de Wet at South Africa's Standard Bank early Friday.
"We will look at [today's] US industrial production growth figures to see whether demand from the industrial sector is improving. Note that after the 15 months of de-stocking by US businesses in 2001, there was a period of massive commodity demand.
"Should growth figures show a marked improvement, inflationary expectations may also climb faster."
Today in Tokyo - where Japanese Gold Futures ended the week almost 2% lower as the Yen rose on the currency market - minutes from the Bank of Japan's latest showed policy-makers debated further credit and cash injections to try and depress the currency to revive the economy.
"Another extension [of monetary stimulus] might become necessary," Board members said.
Last week the Bank of England surprised UK analysts by raising its Quantitative Easing program from £125 billion to £175bn of newly-created Pounds Sterling.
In Washington this week, the Federal Reserve extended until October its $300bn program of Treasury-bond purchases.
New York's SPDR Gold Trust, the world's largest Gold ETF, has now reported lower gold holdings for eight weeks running, down more than 6% from June's record high of 1,134 tonnes.
The fund's largest shareholder, however - John Paulson's $35 billion hedge fund - continued to hold the $2.9bn position it took between Jan. and April during the second quarter of 2009, official filings show.
Paulson, who also acquired a 2% stake in Bank of America between April and July, saw the value of his fund's gold and Gold Mining investments rise by more than two-fifths last quarter, says Barron's magazine, rising further to $5.5bn by Thursday's close.
"The topside [in Gold] seems to be constrained at $960 on a closing basis," says a short-term technical note from Scotia Mocatta. "Downtrend resistance currently comes in $969.75, with a break of that leading to a $980 target."
Meantime on the supply side, gold output in South Africa - formerly the world's No.1 producer nation - fell more than 12% in June from a year earlier, contrasting with a 6.4% drop in non-gold mineral output.
US Gold Mining giant Newmont Mining today said its US$2.9bn Boddington mine in Western Australia is now in production, processing 100,000 tonnes of ore during the first two weeks of August and on target to "become a cornerstone asset in our portfolio," according to president and CEO Richard O'Brien.
Globally, however, new gold discoveries continue to lag production, shrinking the below-ground assets of the mining industry.
Between 1992 and 2005, according to research from Metals Economics Group, world output totaled 1.1 billion ounces. New discoveries of large reserves - judged at 2 million ounces or more - were barely half that size.
The last major find was in 2007 and there were none in 2008. A decade earlier, says MEG, the gold-mining industry made 15 large-scale discoveries per year.