The gold price remains around 3% below its three-and-a-half month high this morning, after falling for the fourth straight session. It remains around the $1,390 mark having failed to hold above $1,400 last week. The delayed decision over Syria has seen it lose some of its safe-haven appeal.
Yesterday was quiet as US markets were closed for the US Labour Day holiday. As they reopen today we may see more
Gold prices have also suffered on the back of improved economic data, in both Europe and across Asia.
The ongoing delay in the decision over Syria is likely to return attention to the FOMC meeting taking place in a couple of weeks. But of course, not before the Non Farm payrolls data which is also due this week.
A report from the Deutsche Bank states that the FOMC meeting is likely to ‘provide some risks for the sector’ however in Q3, the precious metals sector is the best performing. The analysts’ note explains that since the end of June the DBLCI-OY Precious Metals index is up almost 15%.
India’s ongoing war with gold
Yesterday was the first day of doubled margins on gold futures contracts in India. Whilst initial margins on contracts were raised from 4% to 5% there was an initial margin of 5% added to gold and silver contracts. Futures prices, in India have increased by over 6% this year, compared to the 17% decline in dollar prices for gold.
Sebi, the market regulator in India, has begun a clamp down on gold-backed ETFs as part of the wider effort to dissuade physical gold investment. Whilst the regulator insists that this is not a policy decision, they will not be approving any new gold-backed ETF products.
In March this year total holdings in India’s gold ETFs totalled 38 tonnes, double that in March 2011.
Today the South Africa’s National Union of Mineworkers, which represents about 64 percent of gold miners, will begin their strike in protest over pay conditions.
Silver continues to defy gold, climbing steadily higher. It has benefited from improved sentiment surrounding the economic recovery. China’s official Purchasing Managers’ Index jumped more than estimated to a 16-month high. Whilst the PMI measure released by HSBC saw it jump to levels not seen since 2010.
The week ahead
As we hinted yesterday, September is traditionally a good month for gold, but according to Zerohedge it might just be an ‘explosive month’. The following is just a brief glimpse into what is to come in the next few weeks:
- Sept. 5: BoE, ECB announce monetary policy decisions
- Sept. 6: U.S. Aug. change in nonfarm payrolls
- Sept. 9: Italy Senate committee to start debate on Berlusconi’s expulsion after his tax-fraud conviction
- Sept. 13: Euro-area finance ministers meet
- Sept. 16: Portugal EU/IMF aid review mission starts
- Sept. 18: FOMC meeting with rate decision and economic projections being released
- Sept. 22: Germany holds federal elections
- Sept. 29: Portugal holds municipal elections