Gold "Respecting Uptrend", Berlusconi Speaks of "Desperation"
at Returning to Public Life after Monti Announces Resignation Plan
from
Ben TraynorBullionVault
SPOT MARKET gold bullion prices
rose to one-week highs above $1710 an ounce Monday morning, while European
stock markets fell following news that Italy's prime minister plans to resign.
"Gold continues to consolidate its gains from August-September, and
is still respecting its long term uptrend," says the latest technical
analysis from bullion dealing Scotiabank.
Italy's FTSE MIB index was down more than 3% on the day by Monday
lunchtime, after technocrat Italian prime minister Mario Monti announced over
the weekend his intention to resign once Italy's next budget is passed by
parliament.
Monti's announcement comes after members of former prime minister Silvio
Berlusconi's People of Liberty party last Thursday declined to support a
package of economic measures proposed by Monti's government.
Berlusconi wrote on his Facebook page Saturday that he intends to
contest next year's elections.
"Everybody agrees that we need an acknowledged leader to win,"
he said.
"Such leader, a replica of what Berlusconi was in '94, has not been
found. It is not a matter of not having searched: we have indeed searched for
one, but he does not exist...it is with desperation that I am returning to take
interest in public affairs, and once again I am doing so out of a sense of
responsibility."
Over in Athens meantime, the Greek government has extended until noon
tomorrow London time the deadline for bondholders to participate in its bond
buyback, through which Greece hopes to buy back debt with a face value of
around €30 billion, spending €10 billion since the bonds are trading below par.
"Investors should bear in mind that even if Greece accepts all
bonds tendered in the Invitation, it will continue to engage with its official
sector creditors in considering further steps to put its debt on a sustainable
path," says a statement from the Greek finance ministry.
"Future measures may not involve an opportunity to exit investments
in Designated Securities at the levels offered for this buy back."
Greece was close to reaching its target for the buyback by Sunday,
according to an unnamed finance ministry official quoted by news agency
Bloomberg.
"They call this debt sustainability, but it's only [sustainable] on
paper," says Commerzbank chief economist Joerg Kraemer.
"The buyback was a success because investors do not believe in the
debt sustainability."
Silver meantime hovered above $33.30 an ounce for most of Tuesday
morning, up slightly on last week's close, while other industrial commodities
ticked higher and US Treasury bonds also gained.
Over in New York, the difference between bullish and bearish contracts
held by gold futures and options traders on the Comex – known as the
speculative net long position – fell 18.5% in the week ended last Tuesday,
according to the weekly Commitments of Traders report published Friday by the
Commodity Futures Trading Commission.
"The cracks in investor confidence that we saw in the preceding
week widened considerably," says Marc Ground, commodities strategist at
Standard Bank.
"[However] despite the liquidations, we still feel that the
prospect of continued monetary accommodation should provide support for gold
over the medium term. Coupled with fairly robust physical buying, we maintain
that dips below the $1700 level represent a good buying opportunity."
Holdings of gold bullion backing the SPDR Gold Shares (GLD), the world's
biggest gold ETF, rose to a
new high of 1353.3 tonnes on Friday.
The Federal Open Market Committee meets tomorrow and Wednesday to discuss
Federal Reserve policy.
"The FOMC faces a tricky task in managing the end of Operation
Twist," says a note from ING, referring to the Fed's maturity extension
program, due to end this month, through which the central bank sells
shorter-dated Treasury bonds and buys longer-dated ones with the aim of
lowering longer-term interest rates.
"[The Fed] will be at pains to replace it with something that
markets do not interpret as hawkish."
"Market expectation is that there could be more quantitative easing
towards the end of the month, and this will be supportive of gold," says
Lynette Tan, analyst at Philip Futures in Singapore, though she added that
uncertainty over the so-called fiscal cliff is likely to keep gold range bound
between $1680 and $1750 an ounce.
More recycled gold bullion will flow to Singapore from next year as a
result of a new refinery being built there by Swiss refiner Metalor, according
to Metalor's Robert Gilles, quoted by Singapore's
Business Times Monday.
"What is happening now is you have the scrap going out of the
region and coming back in the form of good delivery bars,"
says Gilles.
Because it's expensive to transport high value materials, it makes sense
to have a refinery taking up the scrap, creating fine gold and then
transforming this fine gold into bars."
South Africa's Rand Refinery announced last month that it is building an
assaying and sampling facility in Singapore.
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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