Tag Archives: precious metal

GoldCoins

Gold Pares Weekly Loss But Set For Annual Drop

The Federal Reserve’s decision earlier this week to start cutting back on stimulus helped gold gain some of the ground it lost after closing at its lowest level since 2010. Accoridng to Goldman Sachs Group Inc., however, bullion’s downwards movement has not come to an end as the precious metal is set for its biggest annual decline since 1981.

The turbulent economic conditions around the globe that marked 2013 have diminished investors faith in gold as a store of value, sending it towards its first annual decline since 2000. On 18th December, the Fed decided to finally begin reducing its bond-buying programme from $85 billion to $75 billion. The decision pushed U.S. equities to record highs, while exchange-traded products that are backed by gold lost about $73 billion this year and mining companies dropped at least $26 billion.

Goldman’s head of commodities research in New York, Jeffrey Currie, said that “gold is now likely to grind lower throughout 2014. Much of the expected price decline has been priced in as opposed to a more gentle process as the Fed backs away from QE. When the gold market sees these events, it usually tries to price it in immediately.”

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GoldBalance

Gold Breaks Its Fall Despite Forecasts of Stimulus Tapering

Speculation that the Federal Reserve may decrease its economic stimulus as early as next week didn’t seem to be doing gold any favours; however, the safe-heaven’s decline halted after just two days as the five-month low prices may be luring investors back towards it.

Bullion to be delivered immediately increased as much as 0.4 percent in Singapore today, while yesterday prices had fallen 2.1 percent, the most since 2nd December. When data last week came in positive for U.S. payrolls in November, gold touched $1,210.61 on 6th December, the lowest since 5th July.

The precious metal is set for its first annual lost in 13 years with a decline of 27 percent this year as investors anticipate Fed cuts on improving U.S. economy. The FOMC meeting is scheduled for next week, 17-18 December, and 34 percent of the economist that participated in a Bloomberg survey expect the cuts to begin next month. On a poll conducted on the 8th November, only 17 percent thought so.

Gold for February delivery increased 0.3 percent after its greatest fall in 10 weeks yesterday. The volume of trading remained at similar levels to the 100-day average

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Phone conversation

London Gold Fix Criticised for Unfair Advantage

A daily private meeting between bankers representing five institutions conducted over the phone with conversations lasting anywhere between minutes to hours. The purpose? To determine the going price of gold for the day. Sounds too “private” and unregulated to be happening anywhere outside a movie? Think again, because that’s how gold prices are set up every day in London since 1919.

Are you wondering whether such an arrangement does not leave too much room for inside information to circulation giving unfair advantages to the parties involved? So do dealers and economists in Britain. The U.K. Financial Conduct Authority is investigating into the manner by which prices in the $20 trillion gold market are set during these meetings, according to some sources. The benchmark rate, known as the London fix, is used by mining companies, jewellers, and central banks alike for the purchase, selling and valuation of the precious metal, and is published twice daily following the telephone calls between Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA. (GLE)

The process has come under fire recently as it is to be giving an unfair advantage, first to the participants of these meetings, who can trade gold an its derivatives on the spot market and exchanges even while the calls are in progress and negotiations developing, causing a spike in gold derivatives just after the fixing starts. Then, there are also the clients of the banks involved in the fixing talks who get first reports of the meetings’ content and bet on the final outcome.

The privileged knowledge that the London gold-fixing system offers to the parties involved in the process which is far superior to anyone else’s knowledge on the market constitutes a great flaw.

leit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former economist at Barclays. “That is the great flaw of the London gold-fixing.”

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melted gold

Gold Slides for Fifth Day; Gold Bug Expects Reversal Soon

After its speedy rise at the end of the U.S. government shutdown and signs of a struggling American economy, gold recorded its fifth consecutive day of rapid decline, heading for the longest slump in three months, after data showed U.S. manufacturing activity climbed to a two-year high, spurring speculation that the Federal Reserve will after all begin paring stimulus sooner that previously forecast.

Bullion for immediate delivery fell as much as 0.3 percent to $1,312.24 an ounce. Further drop today would mark the longer losing run since the five days leading to 1st August.

Gold plummeted 22 percent in 2013 as investors sold off the safe-haven commodity as prospects of an economic recovery appeared on the horizon. Although the Fed maintained its $85 billion monthly bond-buying programme last week, it also noted signs of underlying strength” in the world’s largest economy that seems to have renewed investors trust in the USD.

But not everyone agrees that investors should so quickly shun the precious metal. Peter Schiff, nicknamed gold bug, predicts gold will maintain its 21 percent year-to-date fall and even surge 52 percent to hit a record $2,000 an ounce within a year. Schiff stated that he’s waiting for a dollar crash, one much worse than any thus-far experienced, that will benefit gold. Despite the gold bug’s accurate predictions in 2006 about the burst of the housing bubble and bank bankruptcy, many critics laugh at his recent predictions seeing no signs for such economic reversal.

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Gold production

Barrick Gold to Sell Shares for Debt Reduction

Barrick Gold Corp. (ABX), the world’s largest gold producer, plans to sell shares to raise about $3.45 billion in efforts to reduce its debt, which has increased this year as the price of gold declined.

The Toronto-based company announced today that it agreed to sell 163.5 million shares for $18.35 each in so-called bought deal that’s underwritten by a group led by RBC Capital Markets, Barclays Plc and GMP Securities LP. The company also said that there’s an over-allotment option for the sale of 24.5 million shares.

As the price of gold has declined 21 percent this year, the company found itself under immense pressure. Thus Chief Executive Officer Jamie Sokalsky has considered many ways to raise capital including a strategic equity investment, a sale of a stake in its copper business and selling a stale in its $8.5 billion Pascua-Lama project to a state-backed Chinese investor. Barrick announced earlier today that it will postpone constructions at Pascua-Lama to conserve cash.

The announcement of the share sale came yesterday after the close of regular trading in New York yesterday, where Barrick plunged 5.4 percent to $18.34 at 6 p.m.
Barrick expects to use $2.6 billion from the stock sale to repurchase bonds. It will use $1.1 billion to buy back $700 million of 1.75 percent notes due 2014 and $350 million of 4.875 percent notes, also due in 2014.

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