Gold & Silver Drop as "Syrian Strike Delayed", Indian Sales Flood Jewelers

BENCHMARK physical gold prices retreated 2% from yesterday's 3-month high of $1433 per ounce early Thursday in London, hitting $1405 per ounce before rallying $10 and shrugging off a stronger-than-expected revision to US economic growth.

World stock markets rose for the first time in four sessions, whilst crude oil eased 0.5% lower from this week's new 6-month highs.

Silver dropped 5% from its best level since the mid-April crash, bouncing off $23.80 per ounce.

"The significance of the Syria problem may have eased a bit in the past one or two days," says $33 billion equities manager Tobias Britsch at Meriten in Dusseldorf, Germany, speaking to Bloomberg.

"What looked to be an imminent strike on Syria looks set to be delayed a few days," agrees Dutch bank ING.

"This lull may allow macro trends to win through today – which could be USD positive."

UN Secretary General Ban Ki-Moon says his weapons inspectors are now due to report on Saturday into last week's Syrian chemical attack near Damascus.

China's meantime urged caution, while the UK parliament was recalled early to debate to issue. 

US congressional leaders are due to be briefed later Thursday.

"Tapering will eventually support the Dollar against the Euro," Bloomberg separately quotes HSBC currency strategist Robert Lynch in New York. 

Reducing the Federal Reserve's $85 billion in monthly quantitative easing – previously expected at the US central bank's September meeting – "will put some downward pressure on currencies that have been otherwise supported by the liquidity the Fed has been pumping into the economy," says Lynch.

Emerging-market growth will be hit by Fed tapering, warn Lynch's colleagues at HSBC's Asset Allocation team, advising clients today to expect falling commodity and gold prices "as they are likely to face headwinds." 

The Indian Rupee meantime rallied almost 3% on Thursday after the Reserve Bank offered to supply Dollars to oil importers directly.

Anand Sharma, India's minister of commerce & industry, today denied urging the RBI to sell or lease out any of its national gold bullion reserves.

Even if [only] 500 tonnes is monetised," Sharma said Tuesday, "then at today's price, I think it takes care of the [current account deficit]."

But "I have not said that there should be an auction or mortgage of gold," he told parliament today. "All I had said was that RBI should look into the benefits of issuing gold bonds or monetising the stock."

"It is for the banking secretary, bankers and the RBI to see how you can monetise gold [from] the country with over 31,000 tonnes of declared gold," Sharma said Tuesday.

The gold price in Rupees this week leapt to new all-time highs as the Rupee fell to new all-time lows.

But for Indian households outside the major bullion centers, the gold price has now fallen below main-market prices, reports the Times of India, lagging Mumbai's futures contracts by as much as 1,000 Rupees per 10 grams – more than 3%.

"[The] only explanation being offered is excessive quantity of gold being up for sale in markets throughout the country," says the paper, noting separately that India's record-high gold price has unleashed a flood of jewelry for sale.

"We are not accepting jewellery exchanges today due to some problem," one store-owner told a Times reporter in Hyderabad. Others would offer only 90% of the gold price.

Adrian Ash

(c) BullionVault 2013

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