Yesterday the Gold price made its biggest one day gain in nine-months when it hit $1,321/oz, a level not seen since April. This morning gold has cooled off slightly but remains above $1,300/oz, it is headed for its third weekly gain. Gold is up 5% this year.
The Silver price had a similarly impressive performance, jumping 4% in last night’s session and continues to hold onto those gains at the time of writing. The precious industrial metal is now at its highest since March 19th.
Interestingly, the price of both Platinum and Palladium have fallen overnight despite wage negotiations coming to a halt in South Africa.
Both the metals benefitted from increased tensions in Iraq and the lack of commitment from the FOMC to raise interest rates. There is some discussion amongst analysts that the sharp move in gold prices was on the back of short-covering and an overreaction from the dovish Fed announcement.
Silver Fix
The LBMA said yesterday that they expect to announce a new silver fix by mid-July. Today the association are listening to proposals from a variety of companies, from Bloomberg LP, CME Group Inc./Thomson Reuters to ETF Securities Ltd and the London Metal Exchange. According to Bloomberg the LBMA will help the chosen participant to develop a mechanism which will take over from the current fix, due to end on August 14th.
So far, no one within the LBMA appears to have addressed the question of ‘do we even need a ‘fix’?’
Developments in China’s gold world
Reuters reports this morning that any alliance between the China National Gold Group and Canadian Mining Company Barrick Gold, will not involve any of the latter’s mines or assets, according to a Chinese official.
An official from the China Gold Association said yesterday that physical demand from the world’s largest buyer is likely to remain flat for the rest of the year, but it will be above 1,000 tonnes. Last year China officially overtook India as the world’s largest importer of gold bullion when demand climbed by over 40% to 1,146 tonnes
Many analysts are looking at gold imports through China, from Hong Kong. However, it is important to remember that there are other ports for gold (namely Beijing and Shenzhen) and the Shanghai Free trade Zone is now also open which will no doubt send many figures and data collection into a flurry of confusion.
The low gold demand is one of the many reasons analysts are this morning warning gold bugs not to get too complacent about either gold or silver’s recent rise in the gold price. We would argue that China’s ongoing moves to facilitate an China-centric gold market, combined with the Fed maintain a doveish stance and the stimulus-ready ECB, there is little doubt that gold is primed for is next move.