Morning Gold & Silver Market Report – 11/18/2011

* Italian, Spanish bond yields hold close to unsustainable levels

* Central banks gold buying may continue-Turner

* Inflationary measure to tackle Euro crisis may support gold

By Silvia Antonioli

LONDON, Nov 18 (Reuters) - Gold inched up on Friday helped by a weaker dollar and buying after the prior session's falls but was still on track for its largest weekly loss since September as  euro zone  debt contagion worries spooked investors.

Silver also rose slightly after falling almost 6 percent in the previous session amid a broad retreat in both precious and industrial metals, triggered by a flurry of stop-loss selling.

European debt contagion fears and rising money market stress were making investors nervous even though Italian and Spanish government debt yields fell as the European Central Bank (ECB) bought bonds in the secondary market, but held close to unsustainable levels.

Spot gold edged up 0.17 percent to $1,724.2 an ounce by 1424 GMT, from $1,721.19 late in New York on Thursday.

In the previous session, it fell 2.5 percent and hit a 2-1/2 week low at $1,709.64 an ounce and it was on track for a weekly decline of almost 4 percent.

U.S. December gold  futures  were at $1,722.10 an ounce, up 0.12 percent on the day.

Supporting gold, the euro rose against the dollar on Friday as speculation the ECB may start lending to the International Monetary Fund to bail out bigger euro zone economies helped lift the embattled bloc's currency.

A weaker dollar makes dollar-priced commodities such as precious metals more affordable for holders of other  currencies.

" I think it's a bit of a bounce back after a shock yesterday but I wouldn't get too excited," Matthew Turner, an analyst at Mitsubishi said.

" There is a bit of bargain-hunting going on the euro prices are flat and that implies that the dollar gains are to do with the (weaker) dollar."

Gold has confounded market watchers by refusing to behave like a safe-haven and instead has tracked equities over the past few weeks, but the escalating European debt crisis could see bullion ditch its risk-asset mantle and return to record highs.

" There is a strong argument that this euro crisis should support gold, especially if the solution to it will involve printing money and easing monetary policies, which are inflationary measures. On the other hand these big shocks are making investors nervous," Turner said.

Bullion is often used as an inflation hedge by investors.

" The longer uncertainty dwells, the more chance there is for bullion to bounce back up, given ultra-low currency yields globally," VTB Capital said in a research note.

SOLID FUNDAMENTALS

Although investors were focusing more on macro news, market fundamentals seemed supportive for gold.

Demand for gold rose by 6 percent to a 1-1/4 year high in the third quarter of 2011, driven by central bank purchases and European demand for bullion against the backdrop of the escalating euro crisis, a report from the World Gold Council, an industry group showed on Thursday.

" There are positive market news like central banks buying, which is supportive," Turner said.

" The only problem with that is that it is in the past but it might continue as a lot of central banks hold dollars and would like some diversification."

Also showing increasing interest in gold-related assets, holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust rose 0.95 percent from Wednesday to Thursday, while that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged for the same period.

Spot silver was up about 1 percent to $32.01 an ounce from $31.68 late in New York on Thursday platinum rose 0.65 percent to $1,588.3 an ounce from $1,578 and palladium fell 0.29 percent to $603.72 an ounce from $605.47. (Reporting by Silvia Antonioli Editing by Alison Birrane)

 

 

Closing Gold & Silver Market Report – 11/17/2011

Morning Gold & Silver Market Report – 11/17/2011

* Spat between Germany and  France  over ECB role spooks investors

* World Gold Council data seen as bullish

* Coming next: U.S. jobless data 1330 GMT

By Silvia Antonioli

LONDON, Nov 17 (Reuters) - Gold fell to a one week low on Thursday as worries of a contagion of the Euro zone debt crisis from peripheral to core economies kept investors nervous and prompted some to liquidate profitable gold positions to cover losses in other asset classes.

The cost of insuring French and Spanish 5-year government debt against default rose to record highs and the spread between French 10-year government bonds and their German equivalents jumped to a fresh euro-era high on fears the debt crisis was deepening and spreading to the larger  euro zone  economies.

A spat between France and  Germany  on Wednesday over whether the European Central Bank should intervene more forcefully to halt the euro zone's accelerating debt crisis raised doubts about the Euro leaders capability to find a solution.

" The bark in the Euro zone and the spat between Germany and France is pulling gold down," Credit Agricole analyst Robin Bhar said. " It is a bit surprising that gold continues to act like a risk asset rather than as a safe haven but in the short-term there is more need for dollars rather than need to hold profitable positions in gold."

Spot gold edged down 0.79 percent to $1,747.60 an ounce by 1309 GMT, from $1,762.29 late in New York on Wednesday.

Weighing on gold, the euro slipped back towards five-week lows against the dollar, undermined by soaring yields at a Spanish bond auction that fuelled concerns about debt contagion and drove investors to safe-haven  currencies.

A stronger U.S. currency makes dollar-priced commodities such as precious metals costlier for holders of other currencies.

Given the funding stress in the banking sector negatively affecting a number of investment classes, many are liquidating their profitable gold positions to pay losses in other assets, analysts said.

This is likely to continue for the next few weeks as the financial year-end approaches for a number of market players and book squaring may prompt more liquidation.

The long-term outlook however, remains bright for gold, as physical demand has increased lately with investors and banks looking to stock up on secure assets.

BULLISH DATA

Demand for gold rose by 6 percent to a 1-1/4 year high in the third quarter of 2011, driven by central bank purchases and European demand for bullion against the backdrop of the escalating euro crisis, according to a report by the World Gold Council (WGC).

After a 20 percent slump in the third quarter from the previous, gold imports to India, the world's biggest consumer of bullion, are likely to recover in the last quarter of 2011 as demand emerges from traders who destocked in the third quarter of the current year, the World Gold Council's India head said.

" Crucially, in today's report, the WGC note that additional purchases were made by a number of countries' central banks, which cannot currently be identified due to confidentiality restrictions," UBS said in a research note.

" The gap between the known purchases and the confidential ones is very significant... This information is very bullish. And no doubt the market will be busy speculating on the identity of such buyers."

Even a move by hedge fund manager and long-time gold bull John Paulson to slash ETF bullion holdings by a third does not appear to be a sign that he is abandoning his upbeat view of the metal, industry sources and analysts said.

" Paulson may be moving to gold equities or physical gold. After all even with ETFs there is counter-party risk," Bhar said. " He may be switching holdings from one gold vehicle to a safer gold vehicle."

Holdings of the largest gold-backed exchange-traded-fund (ETF), New York's SPDR Gold Trust climbed 0.72 percent from Tuesday to Wednesday, while that of the largest silver-backed ETF, New York's iShares Silver Trust remained unchanged for the same period.

Spot silver fell 1.72 percent to $33.08 an ounce from $33.68 late in New York on Wednesday, platinum fell 0.65 percent to $1,601.50 an ounce from $1,612.7 and palladium fell 2.21 percent to $630.47 an ounce from $644.72. (Editing by William Hardy)

 

 

Morning Gold & Silver Market Report – 11/16/2011