Gold price hovers around 960 with a soft tone in European morning as profit-taking continues after the yellow metal surged to a 2-month high of 972.7 Thursday. USD's recovery also weighs on price.
The ECB and 18 other central banks signed the third 5-year agreement on gold sales (CBGA 3). There are 4 important statements in the agreement: 1. Gold remains an important element of global monetary reserves; 2. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted program of sales over a period of five years, starting on 27 September 2009, immediately after the end of the previous agreement. Annual sales will not exceed 400 metric tons and total sales over this period will not exceed 2,000 metric tons; 3.The signatories recognize the intention of the IMF to sell 403 metric tons of gold and noted that such sales can be accommodated within the above ceilings; 4. This agreement will be reviewed after five years.
CBGA 3 will last until September 2010 and the annual cap of 400 metric tons is lower than 500 metric tons in the previous agreement.
The agreement is positive for gold as it eliminated the risk that central banks in Europe will dispose gold in an uncontrolled manner. Indeed, this risk has diminished greatly in recent years. Statistics showed that gold sales by central banks has dropped -73% yoy in 1H09.Moreover, SNB stated that it 'has no plans for any further gold sales in the foreseeable future. With gold holdings amounting to 1,040 metric tons, it holds a substantial part of its currency reserves in the form of gold'. As of June 2009, Switzerland is the 7th largest gold holders in the world while the US remained in the first rank.
Platinum price tumbles for the second day, by -1.9%, to 1240 after the 5-day rally had also brought the noble metal to the highest level since early June.
The 'cash for clunkers' program in the US may help boost demand for platinum as automakers are busy replenishing inventories. The rebate program allows consumers to receive a $3500 or $4500 discount for their trade-in vehicles when they trade in their oil vehicle and purchase or lease a new vehicle. The program will likely be extended to September. According to the Transportation Department, it has received over 180K dealer applications for funds totaling $ 775M through August 5.
Currently trading at 71.3, WTI crude oil has been clustered within the range of 70-72.While recent rally in the black gold has been driven by macroeconomic outlook and bullishness in stock markets, traders need to see more evidence that the energy market has improved fundamentals before price can reach a new high year-to-date.
Stock market dropped in Asia with the MSCI Asia Pacific Index sliding -0.7% as disappointing corporate earnings results spurred concerns that current valuations are too high. Although Japan's Nikkei 225 Stock Average managed to closed +0.23% higher at 10412, the index plunged to as low as 10249 after both Konica, the office equipment maker, and Kubota, the largest farm machinery producer in Japan, reported worse-than-expected earnings.
In Europe, most benchmark indices open lower. UK's FTSE 100 Index slides -1.15% to 4636. Germany's DAX and France's CAC 40 also loses -0.8 and -0.9% to 5328 and 3446, respectively.