‘Gold Wars’ - Swiss Shenanigans Intensify Prior To November 30 Vote [11]
Today’s AM fix was USD 1,154.00, EUR 926.31 and GBP 736.20 per ounce.
Yesterday’s AM fix was USD 1,161.00, EUR 930.81 and GBP 736.26 per ounce.
Gold climbed $1.70 or 0.15% to $1,161.80/oz yesterday. Silver fell $0.06 or 0.38% to $15.61/oz.
Gold for immediate delivery lost 0.8% to $1,153.50/oz in late morning trade in London. It reached $1,132.16 last Friday, November 7, the lowest since April 2010.
Gold, for the moment, is taking its signal and remaining weak due to the resurgent dollar and buoyant and bubbling stock markets (see chart below).
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S&P 500 - 20 Years (Thomson Reuters)
There are lots of important economic data points in the coming week including US October industrial output, US PPI & CPI, Germany ZEW and China HSBC Flash November Mfg PMI.
Negative numbers, particularly weak industrial output and higher than expected inflation would likely see gold supported and could even see a safe haven bid and short covering rally.
More dovish than expected FOMC Minutes could also support gold. Hawkish minutes could lead to further weakness and gold testing the next level of support at $1,100/oz.
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Gold in U.S. Dollars - 10 Years (Thomson Reuters)
Gold remains very vulnerable and further declines to $1,000/oz are quite possible. Though the momentum of the selling seems to have abated somewhat, momentum is a powerful thing and the short term trend remains down.
Three important factors which should support gold above $1,100/oz are Chinese demand, central bank demand including from Russia and of course the Swiss Gold Referendum.
Chinese SGE Gold withdrawals for the week were at 54.19 tonnes suggesting Chinese gold demand is more robust than thought.
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Chinese SGE Weekly Gold Withdrawals at 54.19 tonnes
Questions are being asked about whether Chinese demand has actually fallen as the WGC suggest.
They appear to be only viewing Chinese demand through the rather narrow prism of Hong Kong exports to China. However, today China is importing huge volumes of gold bullion from all over the world and therefore deliveries on the Shanghai Gold Exchange are a much better benchmark of real Chinese demand.
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Silver in U.S. Dollars - 10 Years (Thomson Reuters)Russia, according to the latest data from The World Gold Council (WGC) has continued to buy significant amounts of gold. Dwarfing the rest of the world's buying in Q3, Russia added a large 55 tonnes to its reserves.
The Telegraph [14] reports that Putin is taking advantage of lower gold prices to pack the vaults of Russia's central bank with bullion as it prepares for the possibility of a long, drawn-out economic war with the West.
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Russia bought more gold in Q3 then all other countries combined...
It is not just Russia buying gold. So too are ex Soviet States which are aligned with Russia. Meanwhile, the People’s Bank of China quietly continues to stealth diversify its reserves into gold.
The Swiss gold referendum is in just 16 days and volatility is likely to pick up ahead of the big vote. A 'no' vote is still more likely than a 'yes' vote but the results will likely be very close.
There is much dissatisfaction with politicians amongst voters in the western world. Indeed, there is a distrust of banks and bankers. The Swiss people are stubbornly independent and quite contrarian by nature. Also there is the important fact that there is a another vote on the same day about immigration in Switzerland and this is likely to bring out more conservative voters who may vote for the Swiss Gold Initiative.
All in all it promises to very interesting and very close and should result in volatility in the gold market.
Should there be a sense that the yes side may win then we would expect gold to recover from its recent bout weakness and test $1,200/oz again.
We remain bearish in the short term but very bullish for 2015 and in the coming years.
Read Essential Guide to Gold Storage in Switzerland [12]
www.GoldCore.com [15]