Gold, Silver Shares Hold Gains Despite Market Sell-Off

Shares of most precious metals companies remained firmly in positive territory this afternoon despite a negative reversal in the broader equity markets.
The Philadelphia Gold & Silver Index (XAU) – which rose this morning to 167.22, its best level since June 20th – traded up by 2.2% at 164.56 this afternoon.
In contrast, the S&P 500 Index climbed to a four-year high of 1,426.68 this morning but later traded down by 0.3% at 1,413.74.  The sell-off did not coincide with a rebound in the U.S. dollar however, but rather a decline in shares of Apple (APPL) – which yesterday became the largest ever company in the world by market capitalization and now represents over 3.5% of the benchmark U.S. equity index.
As for the gold and silver sectors, notable XAU components in the black on Tuesday included Yamana Gold (AUY), Goldcorp (GG), and Silver Standard Resources (SSRI).  AUY rose by 3.1% to $15.95, GG by 2.5% to $39.37, and SSRI by 4.1% to $13.84 per share.
Commenting on the divergence between the gold sector and the broader markets, Jeffrey Sica – chief investment officer at SICA Wealth Management – sated that “There is still an overriding fear that the equities markets have appreciated beyond the point of sustainability so there is a level of fear and desire for diversification into gold.”
“The economic numbers around the world have not proven to justify a recovery without the anticipated liquidity created by central banks,” Sica added.

Prices to Buy Silver Hit 2-Month High, ECB "Stability Mandate" Means Bond Purchases "Would Not Be Bailouts"

Wholesale market prices to Buy Silver hit a two-month high at $29.09 per ounce Tuesday morning in London – 3.5% up on last week's close – after extending gains from yesterday's trading.
"This changes [silver's] posture to bullish," says the latest technical analysis note from bullion bank Scotia Mocatta.
"There was congestion in the $28.00 area and this should provide some support, while the next target is the $29.90 high from June."
Dollar Gold Prices meantime climbed to their highest level so far this month this morning, hitting $1626 per ounce.
By contrast, the Gold Price in Euros traded lower, falling to €42,069 per kilo (€1308 per ounce), just below last week's close, as the Euro extended gains against the Dollar to breach $1.24.
Stocks and commodities also traded higher, while US, UK and German government bond prices fell, following fresh reports that Eurozone policymakers are looking at ways of limiting the borrowing costs faced by struggling single currency members.
European Central Bank president Mario Draghi has received the backing of fellow ECB Executive Board member Joerg Asmussen, who tells Germany's Frankfurter Rundschau that a new program to buy Eurozone government bonds will be "better designed" than previous ECB interventions.
"A currency can only be stable if its future existence is not in doubt," says Asmussen.
"We operate within our mandate, which is primarily aimed at guaranteeing price stability in the medium term for the entire Euro area."
Britain's Telegraph newspaper meantime says it can "confirm reports" from Germany's Der Spiegel that ECB staff are studying plans to put a limit on Italian and Spanish sovereign bond yields.
"[Asmussen's] choice of wording is crucial," says the Telegraph's Ambrose Evans-Pritchard.
"If it can be shown that the ECB is acting to avert [Eurozone] break-up – known as "convertibility risk" – bond purchases would no longer be deemed a bail-out for Italy and Spain."
Spain successfully auctioned €4.5 billion of 12- and 18-month debt Tuesday, at lower borrowing costs than those faced at similar auctions last month.
Elsewhere in Europe, Jean-Claude Juncker, who heads the Eurogroup of single currency finance ministers, is due to visit Athens tomorrow to discuss Greece's request for an extension on its austerity program.
"The market focus is on the meetings that are happening in and around Greece and the key question is whether or not they allow an extension to the fiscal adjustment program," says Geoff Kendrick, head of European currency strategy at Nomura in London.
The adjustment required from struggling European nations "is at best only half complete", according to a report published by Moody's this week.
China's central bank meantime injected 220 billion Yuan into the financial system Tuesday, although borrowing costs still ticked higher, Bloomberg and Reuters report.
The People's Bank of China used so-called reverse repos, exchanging its cash for borrowers' securities for an agreed period, in an effort to boost current levels of market liquidity. The use of reverse repos is an alternative to cutting interest rates or the reserve requirement ratio, the proportion of their assets institutions are required to hold as reserves.
"The market demand is quite large," one Shanghai trader told Reuters this morning.
"Monday's demand was really heavy. The central bank's action today basically just satisfied current demand, but didn't in any way exceed it in a way that would bring rates down."
"We still expect a reserve requirement cut," adds Dariusz Kowalczyk, Hong Kong-based strategist at Credit Agricole.
Chinese platinum imports doubled last in July compared to a year earlier, while imports of Silver Bullion fell by 4%, Reuters reports, citing customs data.

"Political Factors" to Drive Gold Bullion Market, ECB Bond Buying "Would Be Like Using Drugs"

Gold Bullion fell back below $1615 per ounce during Monday morning's London trading, the level at which it closed last week.
"The 11 week moving average comes in at $1601," say technical analysts at bullion bank Scotia Mocatta, pointing out that gold has now ended the week above that level for four weeks in a row.
Silver Bullion meantime failed to hold on to gains from Monday's Asian trading, falling back towards last week's close at $28.10 per ounce this morning in London.
Other commodities were broadly flat, with copper losing some ground, while European stock markets edged higher, with the exception of the FTSE in London, which was slightly down by lunchtime.
"The gold market this week is likely to be driven predominantly by political factors," says a note from Commerzbank.
Jean-Claude Juncker, head of the Eurogroup of single currency finance ministers, is expected to visit Athens Wednesday to discuss Greece's request for a two-year extension to its austerity program.
A day later, German chancellor Angela Merkel and French president Francois Hollande are due to meet in Berlin, while on Friday and Saturday Greek prime minister Antonis Samaras is expected in Berlin and Paris to continue discussions over extending the Greek program and possible additional aid.
"We cannot create yet another new program," said German finance minister Wolfgang Schaeuble on Saturday.
"It is not responsible to throw money into a bottomless pit."
The European Central Bank meantime is expected to discuss the possibility of setting interest rate limits on sovereign bonds when it meets next month, according to a report in Germany's Spiegel magazine.
The limits would apply to so-called spreads over bunds – the difference between the interest rate on a given nation's government bonds and the yield of German government debt – and would trigger ECB intervention in the market, the magazine reported.
Were such a policy to be announced, "many in the market would still have doubts about whether the ECB has the capacity to make [it] work," says Elwin de Groot, senior market economist at Rabobank.
"[The ECB would need] to pledge unlimited purchases which I think does not really fit with their mandate."
"If we start doing that, we won't stop," said Germany's Schaeuble Saturday when asked about ECB bond buying.
"It's like when you start trying to solve your problems with drugs."
"Despite these objections we would not be surprised at all to see this spread limit idea used," counters Steve Barrow, head of G10 research at Standard Bank.
Here in London, the Bank of England was "naïve" to think that banks were not behaving dishonestly in making interest rate submissions to the Libor panel, the body that sets the interbank lending rate, a UK parliamentary report published Saturday says.
The report, entitled 'Fixing Libor: some preliminary findings', also expressed concern over Bank governor Mervyn King's role in the departure of Barclays chief executive Bob Diamond, who resigned last month after Barclays was fined for interest rate manipulation.
"Whatever the merits of the action taken by the Governor of the Bank of England and the Chairman of the [Financial Services Authority]," the report says, "the action they took has exposed implicit, and potentially arbitrary, power to force out senior figures in the financial services industry. The return of the 'Governor's eyebrows...comes with the need for corporate governance safeguards."
Over in New York, the so-called speculative net long position of Gold Futures and options traders – calculated as the difference between the volume of bullish and bearish contracts – fell slightly over the week ended last Tuesday, figures published Friday by the Commodity Futures Trading Commission show.
By contrast, the world's biggest Gold ETF, the SPDR Gold Trust (GLD), saw its biggest one-day net inflow since last November on Friday. The volume of Gold Bullion held to back GLD shares rose by 0.9% to 1274.7 tonnes – the highest level since July 9.
Here in London, volume of Gold Bullion transferred between major bullion banks fell by 6.4% in July compared to a month earlier, according to London Bullion Market Association clearing statistics released Friday. Year-on-year the fall was 9%, although the number of individual transfers rose by nearly a third.
The volume of Silver Bullion transferred also fell last month, down 5.3% from June and 11.5% year-on-year.