'One-Way Traffic' to Buy Gold Post-Fed in Asia Fades as Swiss Rates Go Negative, Indian Gold Premiums Too

[The Machine]

 

 

BUY GOLD bids faded in late London trade Thursday, taking spot prices down through $1200 and back to $1194 per ounce – the level seen before the US Fed changed key wording in Wednesday's statement on when Dollar interest rates might rise.

 

Instead of waiting a "considerable time", the Fed will now be "patient" before hiking rates from the 0% imposed since the start of 2009.

 

Today the Swiss National Bank cut the interest rate it pays on commercial bank deposits at the central bank to a target of minus 0.25% per year, blaming capital flight from Russia amid the collapse of the Ruble.

 

World stock market extended Wednesday's strong rise on Wall Street except in China, where equities held flat for the day after new data said house prices fell again nationwide in November.

 

"The Fed did a good job of distancing themselves from the 'considerable' guidance," says a note from Dutch bank ING, "without upsetting equity markets."

 

"The precious metals staged a recovery in Asia today," say traders at Swiss refining and finance group MKS.

 

"It was one-way traffic" with Chinese traders in particular buying gold up $1200 per ounce after an initial drop after the Fed statement to $1188.

 

New Swiss export data today showed Indian wholesalers buying 77 tonnes of gold last month, some 3% more than October according to investment bank UBS on "strong demand during Diwali season and some pre-emptive purchases on expectations that import rules might be tightened."

 

But instead, India suddenly eased its anti-import rules at the end of November, "So dealers imported more than their requirement," says MNC Bullion director Daman Prakash Rathod in Chennai.

 

"They are now struggling to find buyers" in the absence of wedding or festival days on the Hindu calendar, Rathod says, with local prices dropping to $2 per ounce below London quotes as retail quotes to buy gold fall, taking the premium negative for the first time in 5 months.

 

Silver prices also eased back from an Asian rally in London trade Thursday, retreating below $16 per ounce for the third time since hitting this 5-year low at the start of November.

 

The Russian Ruble meantime gave back all of its overnight rally after President Putin's annual press conference in Moscow, but held 27% above Tuesday's sudden new all-time low near 80 per Dollar.

 

The Central Bank of Russia has been the world's heaviest sovereign buyer of gold in 2014, taking its reserves into the top 5 at more than 1,170 tonnes.