By Ben Traynor<\/p>\n
BullionVault<\/a><\/p>\n Monday 10October,08:30 EDT<\/p>\n \u00a0<\/strong><\/p>\n Gold Starts Week Strongly, Eurozone Bank Plan “Positive but Ambitious”, China’s Gold Sales Jump 50% but Home Sales Plunge<\/strong><\/p>\n WHOLESALE MARKET<\/strong>\u00a0gold bullion<\/a>\u00a0prices climbed to $1670 an ounce Monday lunchtime in London \u2013 2% up on last week’s close \u2013 while stocks and commodities also rose and government bonds fell following a pledge by France and Germany to recapitalize Europe’s banks.<\/p>\n Silver bullion<\/a>\u00a0rose to $32.37 \u2013 3.8% up on where it ended last week.<\/p>\n “Physical demand for gold is very strong, with gold below $1,650”, says Marc Ground, commodities strategist at Standard Bank.<\/p>\n “[This means] the potential for future short covering exists, which could see prices push higher.”<\/p>\n “The physical premium [on the Shanghai Gold Exchange] has been very strong,” adds one\u00a0gold bullion<\/a>\u00a0dealer in Hong Kong.<\/p>\n China meantime saw strong gold sales during last week’s holiday period \u2013 in sharp contrast to disappointing real estate figures.<\/p>\n The leaders of France and Germany announced Sunday that they will have a new plan to deal with the ongoing Eurozone crisis within the next three weeks.<\/p>\n “We will recapitalize the banks,” said French president Nicolas Sarkozy, as part of a joint briefing held with German chancellor Angela Merkel in Berlin.<\/p>\n “By the end of the month, we will have responded to the crisis.”<\/p>\n “The Merkel-Sarkozy announcement is positive as it focuses on banks,” says Alberto Gallo, London-based strategist at Royal Bank of Scotland.<\/p>\n “The timing appears ambitious, however. Having a full response to the crisis by month-end sets a high bar.”<\/p>\n “Typically liquidity concerns and funding issues are not gold’s friends,” says a note from UBS this morning.<\/p>\n “While a detailed plan was lacking, we view any progress on bank recapitalization as a positive for gold.”<\/p>\n France reportedly wants to use funds from the European Financial Stability Facility \u2013 the Eurozone’s \u20ac440 billion bailout fund \u2013 to recapitalize French banks. Germany, however, is said to view such a step as a last resort.<\/p>\n Franco-Belgian banking group Dexia agreed this morning to the nationalization of its Belgian division by that country’s government.\u00a0<\/p>\n The Belgian government will buy Dexia Bank Belgium for \u20ac4 billion. It has also pledged to guarantee \u20ac90 billion of Dexia’s borrowing over a period of ten years \u2013 the equivalent to around a quarter of Belgium’s GDP last year by International Monetary Fund estimates.<\/p>\n Ratings agency Moody’s warned on Friday it may cut Belgium’s credit rating. Fellow ratings agency Fitch meantime downgraded both Italy and Spain.<\/p>\n Over in China meantime \u2013 the world’s second-largest source of private\u00a0gold bullion<\/a>\u00a0demand \u2013 sales of gold during last week’s National Day Golden Week “were 50% higher from a year earlier,” according to a note from HSBC.<\/p>\n “Due to positive retail buying, we remain upbeat on\u00a0gold prices<\/a>.”<\/p>\n The October Golden Week is also traditionally a peak period for real estate demand. Data taken from 20 major cities however show home sales last week were 23% down compared to a year earlier \u2013 making it the worst in six years. Shanghai saw a 40% drop, news agency Bloomberg reports.<\/p>\n “We expect further downside for both property prices and transaction volumes for the rest of the year,” says Jinsong Du, property analyst at Credit Suisse in Hong Kong.\u00a0<\/p>\n “But most developers were still not willing to cut prices beyond marketing gimmicks, hoping for the government to loosen the [monetary policy] tightening measures soon.”<\/p>\n China’s central bank has raised its interest rates five times in the last 12 months \u2013 while increasing commercial banks’ reserve requirements nine times. The annual rate of consumer price inflation fell to 6.2% last month \u2013 down from 6.5% in August.<\/p>\n In New York, the net long position of bullish minus bearish\u00a0gold futures<\/a>\u00a0and options contracts held by noncommercial \u2013 or ‘speculative’ \u2013 traders on the Comex rose2.2% in the week ended October 4, to the equivalent of around 505 tonnes of\u00a0gold bullion<\/a>, according to data released by the Commodity Futures Trading Commission on Friday. This follows the previous week’s fall of 20%.\u00a0<\/p>\n The gross tonnage of\u00a0gold bullion<\/a>\u00a0held to back shares in world’s largest\u00a0gold ETF<\/a>the SPDR Gold Trust (ticker GLD) in contrast fell by just 1.8% in the two weeks ending October 4.<\/p>\n “Gold ETF<\/a>\u00a0stocks [have] changes only minimally,” said a note published by German bullion refiner Heraeus last week, contrasting this with the fall in speculative futures positions.<\/p>\n “From this it is evident that the longer-term oriented investor…still remains faithful to the yellow metal.”<\/p>\n Ben Traynor<\/p>\n BullionVault<\/a><\/p>\n Gold value calculator<\/a>\u00a0\u00a0 |\u00a0\u00a0 Buy gold online at live prices<\/a><\/p>\n Editor of Gold News<\/a>, the analysis and investment research site from world-leading gold ownership service BullionVault<\/a>, Ben Traynor<\/strong> was formerly editor of the Fleet Street Letter<\/em>, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.<\/p>\n