Golds wholesale market price fell further on Thursday in London trading,
hitting its lowest level since July 8 at $1,537.50 per ounce 19% below
Septembers record high on what dealers called long liquidation and pressure
from the euro zone debt crisis. New laws in Japan were also blamed for forced
sales during Asian trade, with bullion dealers obliged to report all physical
transactions above ¥2 million ($25,600) to the tax authorities starting New
Years Day. Physical gold bullion flows in Europe are very light unsurprisingly
for this time of year, says Swiss refinery and finance group MKS. [A] few
accounts [were seen] bailing out on the break of $1,570 on Wednesday, MKS says,
with the rest of the move driven by illiquidity and forced sellers pushing
themselves out as they push [the gold price] lower. On a London closing-price
basis, Support sits at the trendline off the October 2008 low, currently at
$1,543, says Russell Brownes technical analysis for Scotia Mocatta, pointing to
the uptrend in the gold price starting with the collapse of Lehman Brothers
three years ago. That support level is followed by the September [2011] low
around $1,533, reckons Browne. The euro sank 1.5¢ on Wednesday after new data
showed the European Central Banks balance-sheet swelling to €2.7 trillion last
week after making the first of its unlimited three-year loan offers to
commercial banks. The euro fell again to a 10-year low against the Japanese yen.
Italys latest bond auction, for 10-year notes, went slightly better than the
November auction. Todays sale of 7 billion euros (about $9 billion) in long-term
bonds went for 6.98% versus 7.56% last month. The total sold was less than the
top range of 8.5 billion euros the Italian government was hoping for. Todays
auction is just two basis points below the 7% level that analysts believe is
unsustainable. European stock markets wobbled, but crept slightly higher in
morning trading after finishing yesterday lower. But in the banking sector, The
main problemis not a lack of liquidity, but a lack of trust, says Commerzbanks
Christoph Rieger, head of fixed-income strategy in Frankfurt, speaking to
Bloomberg. There are no central bank tools that would force banks to extend
credit lines among themselves. Pushing higher on its official benchmark level
again on Thursday, the interbank lending rate known as LIBOR is now suffering
the widest gap between the lowest and highest interest rates charged since the
peak of the first financial crisis in March 2009. We maintain that a liquidity
squeeze brought on by the ongoing debt problems in the euro zone would be one of
the greatest threats to commodities, says Marc Ground at Standard Bank today.
Gold, along with the other precious metals, succumbed to the downward pressure.
Risk-off conditions in the short term are putting pressure on the gold price,
says another London dealer in a note, but plenty of the insurance reasons to be
long of gold remain in place and look set to remain so in January. Silver
prices today flirted with 12-month lows beneath $26.80 per ounce, as base metals
fell with agricultural commodity prices. U.S. crude oil held just shy of $100
per barrel as the U.S. Navy warned Tehran it will not tolerate any Iranian
disruption of shipping through the Strait of Hormuz, which Iran has threatened
in retaliation at new international sanctions. Adrian Ash of BullionVault
contributed to this report.
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