FS: US GOLD OPEN - Weak sentiment persists even with PBoC liquidity
New York 09/10/2012 - Gold futures were stuck in neutral Tuesday as a fresh injection of liquidity by China's central bank has not proven potent enough to shake off the general malaise that has gripped the market.
Gold for December delivery on the Comex division of the New York Mercantile Exchange was last down $1.90 at $1,773.80 an ounce. Trade has ranged from $1,771.30 to $1,781.60.
In the wider-markets, the euro was about a quarter cent weaker at 1.2959 against the dollar, while Germany's DAX was down 0.08 percent and France's CAC-40 was up 0.48 percent.
“This morning we’ve seen the [precious metals] complex’s heightened correlation with the euro work to its disadvantage as markets sold off the common currency ahead of [ECB President Mario] Draghi’s appearance before the European Parliament’s Committee on Economic and Monetary Affairs,” Standard Bank said.
“Given that he spoke at length at last week’s ECB meeting regarding the intended direction and role of monetary policy in the region, it is unlikely that he will add anything new today,” it added.
In Greece, roit officers are on duty as German Chancellor Angela Merkel visits Athens.
“We could see further downside if Merkel’s visit to Greece sparks any anti-austerity protests. Markets will also be looking for assurance that Germany is satisfied with the Greek government’s planned fiscal reforms and commitment to those reforms,” Standard Bank added.
Elsewhere, the PBoC used reverse repurchase agreements to pump 265 billion yuan ($42.14 billion) into the money market Tuesday, adding to the 2.418 trillion yuan offered since late June. Soon after the announcement, equity markets in Shanghai rallied to a one month high, the Wall Street Journal reported.
Monetary stimulus is generally supportive of precious metal prices because the presence of cheap cash tends to debase paper currencies and can lead to future inflation.
The PBoC move comes just one day after International Monetary Fund cut its forecast for Asia and Pacific region to 7.2 percent this year, from a previous projection of 7.6 percent.
Meanwhile, the despite rising speculative length, upward momentum in gold prices has faded, Standard Bank warned.
“The fact that speculative length is still being added but prices are not moving higher should be of concern. This implies that the price rally can only be sustained if real demand follows,” the bank analysts said.
The net speculative length in Comex gold rose by just 17.1 tonnes in the week ending October 2. This was a slower pace than during the previous two weeks when the length increased by 42.9 tonnes and 55.8 tonnes respectively, according the the Commodity Futures Trading Commission (CFTC).
“We still see a physical market that reflects a picture of lacklustre demand across many commodities e.g. stockpiles are not declining substantially and/or spot premiums that have generally remained unchanged since the start of August. The rise in speculative length in the absence of strong real demand opens prices up to downside,” Standard Bank concluded.
As for the other precious metals, Comex silver for December delivery was down 3.2 cents at $33.985 an ounce. Trade has ranged from $33.810 to $34.260.
“Clearly silver is taking a lot of direction from gold and equities right now and that focus might be expected to continue today in the wake of a fairly thin US economic report slate,” the CME Group said in a market commentary.
Platinum futures for January delivery on the Nymex were up $3.10 at $1,701.90 an ounce, while the most-actively traded palladium contract was at $660.90 an ounce, up $3.95.
