Today’s AM fix was USD 1,314.75, EUR 984.83 and GBP 825.17 per ounce.
Friday’s AM fix was USD 1,308.25, EUR 984.46 and GBP 827.12 per ounce.
Gold rose $0.20 or 0.015% Friday, closing at $1,323.20/oz. Silver climbed $0.36 or 1.65%, closing at $22.19. Platinum surged $23.05 or 1.6% to $1,450.75/oz, while palladium rose $9.50 or 1.4% to $699.00/oz.
Gold and silver bullion both finished down for the week at 4.7% and 6.8%. The sharp price falls came despite no major economic data, news developments or significant news regarding physical supply and demand.
The sharp losses seen last week appear to be primarily due to speculative paper selling of futures contracts leading to further technical selling as stop loss orders are triggered. There has been no marked decrease in global physical bullion demand or significant physical selling of any note in recent days.
Gold and silver futures surged 2.1% and 3.6% respectively and the dollar fell on the open in Asia prior to determined selling which again capped precious metal prices. Analysts and media attributed the price gains on the withdrawal of Larry Summers from the race to be the new Fed Chairman, leaving Janet Yellen as the new frontrunner.
Some analysts in the blogosphere said that the price gains on Friday and on the open in Asia were due to new allegations of manipulation by Wall Street bullion banks. Two new whistleblowers are believed to have joined Andrew Maguire, the independent bullion trader and whistleblower, in alleging to U.S. regulators and the CFTC. They allege that price fixing is being committed and that prices in the international gold and silver markets had been manipulated in the same way that LIBOR is manipulated (see commentary).
Yellen is known to be very dovish, favouring ultra loose monetary policies, even more so than Bernanke. Therefore, her appointment would be gold and silver bullish, as ultra loose monetary policies and currency debasement will continue.
Yellen’s appointment would also be bullish for risk assets such as stocks and for bonds in the short term. Stock futures and stocks in Asia and Europe have also risen on the development. Yellen was Obama’s favoured successor since he became President and she is favourite with the bookies including Paddy Power. Outside contenders are Timothy Geithner, Donald Kohn and Roger Ferguson.
The Fed may announce tapering this week. Should the Fed taper and reduce QE from $85 billion by $10 or $15 billion, it would be negative gold in the short term but bullish in the medium and long term.
The Federal Reserve and Bernanke have been suggesting for months, indeed years, that they would return to more normal monetary policies by reducing bond buying programmes and gradually increasing interest rates. ‘Talk is cheap’, ‘actions speak louder than words’ and it is always best to watch what central banks do rather than what they say.
Near zero interest rates and the huge bond buying programmes are set to continue for the foreseeable future. Precious metals will only be threatened if there is a sustained period of rising interest rates which lead to positive real interest rates. This is not going to happen anytime soon as it would lead to an economic recession and possibly a severe Depression.
Yellen favours a continuation of zero interest rate policies (ZIRP), which is as important if not more important than ‘tapering’. Yellen said in December 2012, that early 2016 may be a more realistic time to start increasing interest rates.
Some investors will be concerned that Yellen underestimates the risk to the dollar and of inflation and will further contribute to the debasement of the dollar which will lead to further inflation hedging and safe haven demand for gold.
Gold Advances as Dollar Tumbles After Summers Fed Withdrawal – Bloomberg
Gold futures suffer a weekly loss of almost 6% – MarketWatch
Global Banks – Chances Of Another Disastrous Collapse – The Telegraph
BIS: Global Credit Excess Worse Than Pre-Lehman – The Telegraph
Maguire – Fed, LBMA, Comex & Banks On The Edge Of Disaster – King World News
Yellen It Is; Gold Soars; Summers Drops Out; Yellen 100% Assured to Make a Mess – Mish’s Global Economic Analysis