CHINESE ECONOMY LAGS; IRAN TRADING GOLD TO AVOID SANCTIONS?
Gold prices continue to give ground through midday trading as soft corporate earnings and Spanish credit downgrades undercut the euro and U.S. stock markets. Gold bullion, which is seen as an inflation hedge, has pierced below its 50-day moving average. “It feels like deflation is now back in, and the quantitative easing is not going to help out the economy,” said Phillip Streible, senior commodities broker at futures brokerage R.J. O'Brien. Gold has failed to break through the $1,800 per ounce mark twice now, even after the new round of quantitative easing. Investors will be watching this month’s Federal Open Market Committee meeting in Washington for hints of the Fed’s next move.
Chinese factories are feeling the effects of the worst wholesale-cost deflation since 2009. Chinese manufacturers are seeing a reduction in pricing power, and the U.S. has reported a record stretch of import price stability. “Reduced inflation pressure should expand the space for policy makers to take pro-growth actions in their countries,” said Shen Jianguang, at Mizuho in Hong Kong. Shen, who formerly worked at the International Monetary Fund and European Central Bank, went on to say that Chinese officials are likely to reduce banks’ reserve requirements before a Communist Party congress takes power next month. Chinese industrial profits dropped more than 6 percent in August, the largest decline this year.
Iran’s new golden road runs from Istanbul, Turkey to Dubai, as couriers transport millions of dollars worth of Gold bullion in their luggage for further shipment to Iran. Turkish trade data indicates that nearly $2 billion worth of Gold was moved via this route in August. As international sanctions have frozen Iran out of global banking, physical Gold is one of the only means left to move wealth across its border. "Every currency in the world has an identity, but Gold means value without identity. The value is absolute wherever you go," said a trader in Dubai with knowledge of the Gold trade between Turkey and Iran. While the final destination for the shipments is unknown, the size and sudden increase would indicate the Iranian government might be involved.
At 1:00 p.m. (EDT), the APMEX Precious Metals spot prices were:
- Gold, $1710.10, Down $16.20.
- Silver, $31.85, Down $0.42.
- Platinum, $1,575.20, Down $34.50.
- Palladium, $595.70, Down $27.90.
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