By Ben Traynor<\/p>\n
BullionVault<\/a><\/p>\n Monday 20 February 2012,08:30 EST<\/p>\n Gold’s “Consolidation Phase” Continues, “Time to Deliver” for Euro Leaders, China “Shows Growth is Priority”<\/strong><\/p>\n WHOLESALE MARKET <\/strong>gold bullion<\/a>\u00a0prices held above $1730 an ounce in Monday morning’s London trading \u2013 roughly in line with where gold has been for much of February \u2013 while European stocks and commodities edged higher amid hopes that policymakers might finally approve Greece’s second bailout. US markets are closed for a holiday.<\/p>\n Silver bullion<\/a>\u00a0prices were also fairly flat this morning around $33.50 per ounce.<\/p>\n Earlier on Monday,\u00a0gold bullion<\/a>\u00a0prices jumped $14 an ounce in Asian trading after China’s central bank eased its monetary policy stance over the weekend.<\/p>\n “The rally lasted only for a very short period of time,” says one\u00a0gold bullion<\/a>dealer in Hong Kong.<\/p>\n “Once we traded [higher], resting [sell] orders took over and stabilized the market. It seems despite various bits of precious-positive news, the market is still in a consolidation phase.”<\/p>\n The People’s Bank of China announced Saturday that it is cutting the reserve requirement ratio \u2013 which dictates the amount banks must hold in reserve as a proportion of their assets \u2013 by half a percentage point. Large commercial banks will see their RRR fall to 20.5% as a result.<\/p>\n The cut “reflects that stimulating economic growth is currently the government’s priority” reckons HCBS economist Ma Xiaoping, who adds that it will “help release liquidity” to the tune of around 400 billion Yuan ($63.5 billion).<\/p>\n Elsewhere in China, the Shanghai Gold Exchange announced Monday it is cutting its gold trading<\/a> fees on a number of contracts. It follows last week’s announcement by the Shanghai Futures Exchange that it was lowering its margin on\u00a0gold futures<\/a>\u00a0contracts with effect from the start of next month.<\/p>\n Singapore meantime will make investment grade\u00a0gold bullion<\/a>\u00a0exempt from a 7% sales tax with effect from October, Reuters reported Monday, citing industry sources.\u00a0<\/p>\n “I think this is really going to change the landscape in Singapore,” says one gold dealer.<\/p>\n “Asset managers will [be] very excited. The trend in the last three years is that people are moving to physical hard assets from paper.”<\/p>\n Eurozone finance ministers are meeting in Brussels today to discuss putting the finishing touches on Greece’s \u20ac130 billion second bailout.\u00a0<\/p>\n “All the elements are in place,” France’s finance minister Francois Baroin told French radio this morning.<\/p>\n Reports suggest there remains uncertainty over how the entire package will be financed. For example, the Financial Times reports that the European Central Bank has been asked to make up a \u20ac6 billion shortfall by agreeing to forego some profits on its Greek bond holdings \u2013 bought at below-face-value prices on the open market \u2013 which would have the effect of easing Greece’s debt burden.<\/p>\n However, “the gut feeling is that this is going to go through” one Eurozone official tells newswire Reuters.<\/p>\n “Everyone feels the pressure this time to deliver… I don’t see anybody wanting to be responsible for pulling the plug on the deal at this late stage.”<\/p>\n “There is [though] scope for events to disappoint,” warns Neil MacKinnon, London-based global macro strategist at VTB Capital.<\/p>\n Economists at Citigroup say they expect today to bring agreement on a bond swap to reduce Greece’s debts, but that final approval of the complete package may be delayed until after the next European leaders’ summit on March 1.<\/p>\n The International Monetary Fund will only contribute \u20ac13 billion to a second Greek bailout \u2013 equivalent to 10% \u2013 the FT reports, much less than its contribution to previous Eurozone bailouts. Relative to its IMF contribution, Greece already holds the all-time record for the amount borrowed from the IMF, the FT points out.<\/p>\n Iran has ceased its oil exports to Britain and France, its oil ministry announced Sunday. The move follows the imposition of sanctions by the European Union. Monday’s FT reports that Iran is struggling to find buyers for its oil and may have to resort to cutting its output or storing it in tankers, so-called floating storage.<\/p>\n The US Congress Friday approved a bill extending a payroll tax cut and unemployment benefits through to the end of 2012.<\/p>\n “Given that it had until February 29 to do this it was not a bad effort from policymakers,” note Standard Bank currency analysts Steve Barrow and Jeremy Stevens, who add that while the extension adds $100 billion to the US deficit, not extending the tax cuts and benefits could have costs the economy up to one percentage point in growth this year.<\/p>\n In New York meantime the difference between bullish and bearish contracts held by Comex\u00a0gold futures<\/a>\u00a0and options traders \u2013 the so-called speculative net long \u2013 fell over the week ended last Tuesday for the first time since the week ended January 3.<\/p>\n The drop in the spec net long “may mark a consolidation phase in the gold rally in the absence of new price drivers,” says the latest note from precious metals consultancy VM Group.<\/p>\n The volume of\u00a0gold bullion<\/a>\u00a0held to back shares in the world’s largest\u00a0gold ETF<\/a>, the SPDR Gold Trust (GLD), rose to its highest level since December 14 last week. By contrast, the iShares Silver Trust (SLV), the world’s biggest silver\u00a0ETF<\/a>, saw itssilver bullion<\/a>\u00a0holdings decline slightly.<\/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