INV: Gold price poised for sixth weekly gain on financial stress in Portugal
iNVEZZ.com, Friday, July 11: Bullion held on to yesterday’s gains and has been trading close to its highest level in almost four months. The price is set for a sixth consecutive weekly advance as signs of financial stress at a Portuguese bank put a dent in equities and spurred safe-haven demand.
Spot gold was little changed at $1,336.26 a troy ounce as of 07:58 BST. The precious metal settled 0.7 percent up yesterday after hitting an intraday peak of $1,345 – its highest level since March 19. Bullion has appreciated one percent so far this week.
"Money seems to be shifting out of equities and into gold," a precious metals trader in Hong Kong told Reuters. "The Portugal news has brought in a new safe-haven aspect for gold on top of what's happening in the Middle East." The trader added that the sharp gains were surprising considering the negative news from India, where import duties on the metal were kept unchanged at record highs. The import duties are likely to continue to curtail physical demand from the world’s second-biggest gold consumer.
On July 9, the US central bank released the minutes of the Federal Open Market Committee’s (FOMC) June 17-18 policy meeting. FOMC members appeared to agree the Fed’s monthly bond-buying programme would come to an end in October. The policy makers warned about “complacency on the part of market participants about potential risks,” and did not give any clues on when they might introduce an interest rate-hike.
The key catalyst that sent gold up to near four-month highs was more negative European bank news, Tyler Richey, an analyst for the 7:00’s Report, which offers daily markets commentary, told the Wall Street Journal. “Gold is currently in a strong uptrend, and with the heightened volatility in the markets right now, that should continue in the near term towards the $1,355-$1,360 level,” he argued.
Banco Espirito Santo SA (BSE), Portugal’s second-biggest bank by market value, said its exposure to companies of Group Espirito Santo amounts to 1.18 billion euros and stands below its current capital buffer of 2.1 billion euros.
“Banco Espirito Santo’s executive committee believes that the potential losses resulting from the exposure to Grupo Espirito Santo do not compromise the compliance with the regulatory capital requirements,” the Lisbon-based bank said in a regulatory filing. “Banco Espirito Santo is committed not to increase its total exposure to Espirito Santo Group.”
The bank filed the update after its parent company, Espirito Santo International (ESI), said it missed payments on commercial paper to “a few clients.” BSE shares plummeted more than 17 percent yesterday before being suspended from trading. The regulator said last night short selling of BSE stock would be banned today.
