"Technical Reasons" Blamed for Lack of
Agreement on Greece, Brazil and Kazakhstan Add to Gold Reserves, Germany Sells
BullionVault from
Ben Traynor
WHOLESALE gold bullion prices climbed back above $1725 an ounce Wednesday morning in
London, making up some ground lost the previous day, while stocks and the Euro
recovered losses made in Asian trading immediately after the news that European
policymakers had failed to reach a deal on Greece.
"Upside targets [for gold] are now found around
the $1750 mark and then around the $1800 level where the gold price has stalled on three occasions in the past year," says Axel
Rudolph, senior technical analyst at Commerzbank.
Over in Asia, "physical [gold] demand is very,
very bad," according to one trader in Singapore quoted by newswire Reuters
this morning.
"If prices drop another $30 to $50 [an ounce], we
will probably see investors and physical buyers return."
Silver prices hovered just above $33 an ounce for most of this morning, while on
the commodity futures markets oil ticked higher but copper fell.
In the Middle East efforts to broker a truce in Gaza
were dealt a blow when a bomb was detonated on a bus in Tel Aviv.
Wednesday also brought news that the central banks of
Brazil and Kazakhstan were among those who bought gold bullion last month, while Germany reduced its official holding.
Eurozone finance ministers ended their latest meeting
in the early hours of Wednesday morning without an agreement to pay Greece the
next tranche of bailout funding.
"We are close to an agreement but technical
verifications have to be undertaken," said Luxembourg prime minister
Jean-Claude Juncker, who chairs the Eurogroup of single currency finance
ministers.
"There are no major disagreements...financial
calculations have to be made and it's really for technical reasons that at this
hour of the day it was not possible to do it in a proper way."
Juncker appeared to have a public disagreement over
Greece with International Monetary Fund chief Christine Lagarde last week, when the latter disagreed with the idea of extending by two years the
deadline by which to reduce Greece's debt-to-GDP ratio to 120%, from 2020 to
2022.
The IMF managing director has said she would prefer to
see further write downs of Greece's debt, a position opposed by Germany and
several other Eurozone nations.
"We discussed the issue very intensively, but
since the questions are so complicated we didn't come to a final
agreement," added German finance minister Wolfgang Schaeuble after last
night's meeting ended.
"We have a series of options on the table on how
to close the financing gap."
The Eurogroup is due to reconvene next Monday.
"No procrastination can be permitted," Greek
prime minister Antonis Samaras said this morning.
"Greece did what it had to and what it had
committed to...our partners now have a duty to meet the responsibilities they
have assumed."
Earlier this month the Greek government narrowly won a
vote in parliament to implement a further €13.5 billion austerity package,
which Samaras said will be "the final one".
The Euro fell against the Dollar immediately following
the end of the Eurogroup meeting, although it had recovered most of its losses
by Wednesday lunchtime in London.
"European policy makers raised expectations that
something would happen on Greece and then they didn't deliver," says Ned
Rumpeltin, head of G10 currency strategy at Standard Chartered in London.
"What we are seeing is European risk coming back
on to the agenda. It does put downward pressure on the Euro."
In the US meantime, Federal Reserve chairman Ben
Bernanke said in a speech Tuesday that yields on corporate bonds and agency mortgage backed
securities "have fallen significantly" since the Fed announced in
September it will buy $40 billion of MBS a month until the labor market
improves "substantially".
Bernanke added however that the Fed "will want to
be sure that the recovery is established before we begin to normalize
policy", reiterating that "a highly accommodative stance of monetary
policy will remain appropriate for a considerable time after the economic
recovery strengthens".
At this month's Bank of England Monetary Policy
Committee meeting, eight of the nine members voted in favor of maintaining the
size of the Bank's quantitative easing program at £375 billion, the level of it
reached last month, minutes from the meeting published Wednesday show.
The other MPC member, David Miles, voted in favor of
extending QE by buying a further £25 billion of assets. The bulk of assets
bought under the Bank's QE programs have been UK government bonds.
Public sector net borrowing by the UK government was
£8.6 billion last month, official figures published Wednesday show, a 46% rise
compared to October 2011.
Brazil's central bank increased its gold bullion reserve by 17.17 tonnes in October, taking the total to over 52.5
tonnes, data published by the IMF show.
Kazakhstan added 7.5 tonnes to its gold reserve,
taking the total to 111.5 tonnes, while Germany sold 4.2 tonnes, taking its
total to 3391.4 tonnes. Germany's federal auditors last month asked the
Bundesbank to regularly inspect Germany's gold held outside the country.
Editor
of Gold News, the analysis and
investment research site from world-leading gold ownership service BullionVault, Ben Traynor was
formerly editor of the Fleet
Street Letter, the UK's longest-running investment letter. A
Cambridge economics graduate, he is a professional writer and editor with a
specialist interest in monetary economics. Ben writes and presents
BullionVault's weekly gold market summary on YouTube and can be found on
Google+
(c)
BullionVault 2012
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Note: This article is to inform your thinking, not lead it. Only you can decide
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