Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
US Dollar Gold Trend Analysis - 15th June 19
Gold Stocks “Launch” is in Line With Fundamentals - 15th June 19
The Rise of Silver and Major Economic Decline - 15th June 19
Fire Insurance Claims: What Are the Things a Fire Claim Adjuster Does? - 15th June 19
How To Find A Trustworthy Casino? - 15th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match - Video - 14th June 19
Gold and Silver, Precious Metals: T-Minus 3 Seconds To Liftoff! - 14th June 19
Silver Investing Trend Analysis - Video - 14th June 19
The American Dream Is Alive and Well - in China - 14th June 19
Keeping the Online Gaming Industry in Line - 14th June 19
How Acquisitions Affect Global Stocks - 14th June 19
Please Don’t Buy the Dip in Nvidia or Other Chip Stocks - 14th June 19
A Big Thing in Investor Education is Explainer Videos - 14th June 19
IRAN - The Next American War - 13th June 19
Boris Johnson Vs Michael Gove Tory Leadership Grudge Match Contest - 13th June 19
Top Best VPN Services You Can Choose For Your iPhone - 13th June 19
Tory Leadership Contest Betting Markets Forecast - Betfair - 13th June 19
US Stock Market Setting Up A Pennant Formation - 13th June 19
Which Stocks Will Lead The Cannabis Rebound? - 13th June 19
The Privatization of US Indo-Pacific Vision - Project 2049, Armitage, Budget Ploys and Taiwan Nexus - 12th June 19
Gold Price Breaks to the Upside - 12th June 19
Top Publicly Traded Casino Company Stocks for 2019 - 12th June 19
Silver Investing Trend Analysis - 12th June 19
Why Blue-Chip Dividend Stocks Aren’t as Safe as You Think - 12th June 19
Technical Analysis Shows Aug/Sept Stock Market Top Pattern Should Form - 12th June 19
FTSE 100: A Top European Index - 12th June 19
Gold Surprise! - 11th June 19
How Forex Indicators are Getting Even More Attention in the Market? - 11th June 19
Stock Market Storm Clouds on the Horizon - 11th June 19
Is Your Financial Security Based On A Double Aberration? - 11th June 19
What If Stocks Are Wrong About Interest Rate Cuts? - 11th June 19
US House Prices Yield Curve, Debt, QE4EVER! - 11th June 19
Natural Gas Moves Into Basing Zone - 11th June 19
U.S. Dollar Stall is Good for Commodities - 11th June 19
Fed Running Out of Time and Conventional Weapons - 11th June 19
Trade Wars Propelling Stock Markets to New Highs - 11th June 19
Best Travel Bags for Summer Holidays 2019, Back Sling packs, water proof, money belt, tactical - 11th June 19
Betting on Next British Prime Minister Tory Leadership Betfair Markets Forecast - 10th June 19
How Can Stock Market Go Up When We’re Headed Towards a Recession? - 10th June 19
If You Invest in Dividend Stocks, Do This to Double Your Returns - 10th June 19
Reasons for the Success of the Dating Market - 10th June 19
Gold Price Trend Analysis - Video - 10th June 19
US Stock Markets Rally Hard – Could Another Big Upside Leg Begin? - 10th June 19
Stock Market Huge Cosmic Cluster Ahead: Buckle Up! - 10th June 19
Stock Market Higher To Go? - 10th June 19
The Gold Price Golden Neckline… - 10th June 19
Gold Price Seasonal Trend Analysis - 9th June 19
The Fed Stops Pretending - 9th June 19
Fed Rate Cuts Soon; Bitcoin Enthusiasts Join Wall Street in Bashing Gold - 9th June 19
1990s vs. 2010s - Which Expansion Will be Better for Gold? - 9th June 19
Gold Price Trend Analysis, MACD, Trend Channels, Support / Resistance - 8th June 19
Gold Surges Near Breakout - 8th June 19
Could Gold Rally Above $3750 Before December 2019? - 8th June 19
5 Big Lies About Precious Metals Investing Exposed - 8th June 19
ADL Predictive Modeling Suggests A Big Move In Silver - 7th June 19
US China Trade War Will Start a Recession, or Worse… - 7th June 19
Land Rover Discovery Sport Brake Pads Expected Life, Worn Pads Dash Warning - 7th June 19
The Post Room Selfies Fun at Meadowhall Sheffield, From Game of Thrones to Desert Island... - 7th June 19
SAMSUNG - South Korean Electronics Giant - Investing in AI Stocks - Video - 7th June 19
Gold Price Rally or New Bull Market? - 7th June 19
Digging into the Rising Gold: Trade Tensions, Recessionary Worries and Dovish Fed - 7th June 19
The Risky Stocks Big Lie That Keeps Many Investors Poor - 7th June 19
Gold and HUI Short-term Strength Is a Strong Call to Action - 7th June 19
Fear Drives Stock Market Expectations - 7th June 19 - Chris_Vermeulen
Next British Prime Minister Tory Leadership Betting Markets - 6th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

Gold "Does Not Offer Comfort in Liquidity Crunch", European Banks "Could Not Refuse" ECB's "Free Money" Offer

Commodities / Gold and Silver 2011 Dec 21, 2011 - 09:33 AM GMT

By: Ben_Traynor

Commodities

Best Financial Markets Analysis ArticleU.S. DOLLAR gold bullion prices dropped to $1609 an ounce Wednesday lunchtime in London – 1.9% down from the high for the week so far, set less than three hours earlier.

Stocks and commodities also traded lower following an announcement by the European Central Bank about its latest liquidity operation.


"We don't see much fresh [gold] buying from investors as the year end nears," says Dick Poon, Hong Kong-based manager at precious metals group Heraeus.

Silver bullion fell to $29.29 per ounce – having briefly passing the $30 mark – as the Euro fell against the Dollar following news that European banks borrowed a total of €489 billion at the ECB's 3-Year Longer Term Refinancing Operation, which settled Wednesday morning. 

The LTRO – through which the ECB offered to lend to banks for three years against collateral that includes distressed Eurozone government debt – saw 523 bidders. 

The ECB offered the loans at a rate of 1%.

"It was obviously an offer the banks could not refuse," says Laurent Fransolet, head of fixed income strategy at Barclays Capital in London.

"It shows the ECB is not out of ammunition and it gives banks security on liquidity for a few years. On the other hand it means banks will rely on the ECB for longer."

"This is basically free money," said Jens-Oliver Niklasch, Stuttgart-based strategist at Landesbank Baden-Wuerttemberg, speaking before the ECB announced the LTRO results.

"The conditions are unbeatable. Everybody who can will try to get a piece of this cake."

"It remains to be seen [however]," warns ING economist Carsten Brzeski, "whether the money will filter through to the real economy as the ECB hopes. Many banks still have to increase their capital ratios."

"The cash could be used simply to shore up [banks'] balance sheets," agrees Kit Juckes, currency strategist at Societe Generale.

"Or some of it could go into assets, including but not exclusively higher-yielding peripheral debt."
Deutsche Bank has estimated that around half of the €442 billion borrowed by banks at a 1-year LTRO in 2009 was used to buy sovereign debt – the majority going into Greek and Spanish government bonds – the Financial Times reports.

The Euro fell 0.9% against the Dollar immediately following the ECB's announcement, breaking a rally that began early on Tuesday and continuing to fall throughout the rest of the morning.

European stock markets also fell, while Dollar gold bullion prices dropped more than 1% in an hour from $1640 per ounce, their high for the week so far.

In the same period, the gold price in Euros fell 0.6% to €39,847 per kilogram (€1239 per ounce), while the Sterling Price of gold bullion also dropped 0.6%, hitting £1033 per ounce.

Despite rallying for most of this week (until the ECB announcement), the Dollar price of gold bullion remains 5.6% down on the start of last week.

"Gold is not the asset of choice on a search for liquidity," says Dominic Schnider, head of commodity research at UBS Wealth Management.

"It gives you comfort against currency risks, inflation, sovereign debt problems, but not liquidity crunch...[however] holdings of gold ETFs are still holding up despite the recent sell-off, which is a good sign."

The volume of gold bullion held to back shares in the SPDR Gold Trust (ticker: GLD) – the world's largest gold ETF – fell by around 15 tonnes last week, but on Tuesday remained more than 40 tonnes above its 2011 average. 

Here in Britain, minutes from the Bank of England's Monetary Policy Committee meeting earlier this month show all nine MPC members were unanimous in voting to keep the bank's main interest rate at 0.5% – where it has stayed since March 2009.

The MPC was also unanimous in maintaining the size of the Bank's quantitative easing program at £275 billion – to which it was increased in October.

"The Committee agreed that a decision to change policy was not warranted at this meeting," the minutes record.

"Some members [though] continued to note that the balance of risks to inflation...[means] that a further expansion of the asset purchase programme might well become warranted in due course."

Over in the US, the Federal Reserve Tuesday proposed new rules aimed at curbing US banks' risk-taking activities. The plan calls for banks to assess their liquidity needs at least once a month. It stops short, however, of mandating minimum levels of liquid capital, with the Fed saying it will wait to hear the recommendations of the Basel Committee on Banking Supervision.

Analysts meantime expect US banks to post worse results for the fourth quarter of 2011 than they did in Q3, newswire Bloomberg reports. 

By Ben Traynor
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

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.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules