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Gold Trading 'Anemic' After 'Rejecting $1232', Banks' Commodities Profit Sink

GOLD TRADING in London saw Dollar prices slip to 1-week lows at $1202 on Thursday, as US stock markets rose and European shares eked out a small gain following better than expected manufacturing activity data.   The US currency held little changed following Wednesday's release of minutes from the Federal Reserve's latest policy meeting showed little chance of the first rate-rise from 0% coming in June, as formerly hinted.   Silver meantime held firmer than gold, trading above $17.15 per ounce as commodity prices more broadly rose with US Treasury bond prices.   The SPDR Gold Trust (NYSEArca:GLD) had seen further liquidation on Wednesday, shrinking to the fewest shares in issue since late January and needing only 715 tonnes to back their value – down 7.5% from February's recent peak and barel half the highs of 2011-2012.   After the Financial Times reported last weekend that London's gold trading floors "are much quieter" as client activity has fallen since the price peaks of 3-5 years ago, new data today said volumes in the world's central bullion market saw a "sharp fall" last month to the lowest level since September.   The value of gold transferred between the clearing members of the London bullion market fell 8.4% from March to average $20.2 billion per day, trade association the LBMA reported, while the number of transfers fell by almost 12%.   "Volumes have been anemic today," said one London trading desk Thursday, "and the flow of news softer...pointing to neutral fundamentals for gold.   Current positioning in Comex gold options – which will see June contracts expire next week – is also "pointing to yet more indecisive trading" the note adds.   "The market," says bullion market-maker Scotia Mocatta, "is still trying to digest [Tuesday]'s rejection off $1232" – the highest Dollar gold price since mid-February.   "Failure to clear the 50% retracement of the move seen this year," agrees technical analysis from Germany's Commerzbank, pointing to $1227, "does suggest that this upmove lack[ed] dynamism."   Income from commodities trading sank 28% in the first quarter of 2015 compared to the same period last year at the top 10 major investment banks, Reuters notes.   Japan's largest oil trader, Mitsui & Co. – owner of London spot gold and silver market maker Mitsui Global Precious Metals – expects profits to decline 22% this financial year, and is now looking to diversify beyond raw materials to look at "retail, health care, infrastructure connecting food and farms, and mobility."   Wednesday's statement of record fines for several major banks over FX manipulation included immunity for Swiss bullion bank UBS over the ongoing US Justice Departments investigation into allegations of precious metals pricing, Bloomberg reports.

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Gold Bullion 'Bullish' Ahead of Fed Minutes as Funds Buy GLD Calls But Real Money Shuns ETF Trusts

GOLD BULLION held in a tight range around $1210 per ounce Wednesday in London as the US Dollar edged back from 3-week highs ahead of today's release of minutes from the Federal Reserve's late-April meeting.   The Euro bounced off its lowest level of May so far at $1.1062, curbing the gold price in Euros just below Tuesday's 3-week high of €1092 per ounce.   Silver prices tracked gold bullion, rallying from a second dip in two days below $17 per ounce – a 5-week high when broken last Wednesday.   World stock markets held flat and US Treasury bond yields slipped as prices ticked higher before the Fed minutes.   "Until the US economy is unambiguously robust enough to allow the Fed to hike [without] a market or macro shock," says a note from Bank of America Merrill Lynch's chief investment strategist Michael Hartnett, "the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes.   "For this reason we continue to advocate higher than normal levels of cash, adding gold and owning volatility in mid-2015."   Bullish contracts on the SPDR Gold Trust (NYSEArca:GLD) – the world's largest exchange-traded gold backed trust fund – were "among the most heavily traded" equity options in New York on Tuesday, according to the Wall Street Journal.   "The flow that we've seen on GLD is [from] multi-asset managers," the WSJ quotes Swiss bank UBS's head of Americas equity derivatives strategy, Rebecca Cheong.   Giving buyers the right to buy GLD shares below future prices if they go up, the derivatives contracts "[are] a tail hedge," Cheong said.   Shareholdings in the GLD itself, in contrast – favored during the bull market by so-called "real money" managers buying assets at full price rather than using leverage – held unchanged Tuesday at a 4-month low, having dropped for 3 weeks running.   Reviewing how mutual funds have changed their GLD holdings since just before the gold-price crash of 2013, "Non-fund ETF holdings fell earlier and more quickly than [mutual] fund holdings did," wrote Mitsui Global Precious Metals analyst David Jollie last month in a special report.   "Changes in non-fund holdings of GLD have [also] been very closely correlated to movements in the price of gold itself [as] these investors have simply bought into price strength and sold in periods of price weakness."   The GLD ended Tuesday needing 718 tonnes of gold to back its shares in issue, barely half the peak holdings of 2011-2012, and down some 55 tonnes from February's top.   Russia's central bank added 10 tonnes to its bullion reserves in April, it said Wednesday, growing its gold holdings above 1,247 tonnes.   "Gold wiped out over 3 days of gains" on Tuesday, notes bullion market maker Scotia Mocatta's technical strategist Russell Browne, but "only a move back below $1201 would shift our bias from bullish to neutral."   Gold prices, agrees Stephanie Aymes at fellow market makers Societe Generale, are "undergoing a consolidation similar to late last year price action.   "The up move is likely to continue. Short term retracement should be floored at $1205."

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Gold Price Drops 1.5% from 3-Month Dollar High as Euro Sinks on QE Push, ETFs Shed Metal Again

GOLD PRICES fell sharply against a surging Dollar in London on Tuesday, retreating 1.5% from yesterday's 3-month highs as the US currency jumped after weak European inflation data were followed by strong US housing numbers.   The Dollar hit sudden 1-week highs vs. both the Euro and Sterling as Eurozone inflation was confirmed at just 0.6% per year in April, and UK inflation gave its first ever negative reading on the 20-year old Consumer Price Index.   The gold price for Dollar investors retreated below $1215 per ounce, the highest level in almost 6 weeks until last Wednesday's $20 jump following weak US retail sales data.   Gold priced in Euros meantime rose to new 1-month highs above €1090 per ounce, however, after a speech given Monday in London by European Central Bank member Benoit Coeure was published, stating his concern at "the rapidity" of the recent sell-off in Eurozone government bonds, led by German Bund prices.   Eurozone bond yields edged lower as prices held firm on Tuesday, while broad commodity markets dropped 1.4% against the Dollar.   The ECB, said Coeure, also plans to accelerate its quantitative easing in May and June, creating more money to buy government bonds before the fixed-income markets sees their typical "seasonal patterns of notably lower liquidity in the traditional holiday period from mid-July to August."   "Should we get another burst of buying in the Dollar," said a note from US brokers INTL FCStone overnight, "we could see the pressure mount on gold.   "But we suspect that rallies in the greenback will likely be shortlived given the likelihood that the US economy will continue to show signs of ongoing weakness."   US housing data released Tuesday showed both new building permits and building starts rising in April to the highest level since late-2007.   Gold prices in Shanghai – where Chinese authorities are planning to audit all bullion traders as part of a clampdown on fake exports hiding capital outflows – earlier saw "the very small initial premium" above comparable London quotes "moving into discount," says Swiss refining and finance group MKS's Asian desk, removing the key incentive for bullion imports to China.   "Gold sold off in line with EUR/USD breaking below $1.13," says the note, with "silver falling more dramatically on very thin liquidity."   Silver tracked Dollar gold prices lower in London on Tuesday, but held firmer near last week's finish at $17.50 per ounce.   Over in New York on Monday, Dollar silver's new 4-month highs saw the giant iShares Silver Trust (NYSEArca:SLV) shrink by another 37 tonnes as investors cut their exposure, taking the ETF's holdings below 9,890 tonnes, down 3.5% from late-April's three-month high.   The giant SPDR Gold Trust (NYSEArca:GLD) also shrank again, dropping more than 5 tonnes as investors sold out to stand at 718 tonnes – over 7% below end-January's sudden rebound from 7-year lows at New Year.

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