GOLD BULLION rallied $8 per ounce from yesterday’s 1-week low of $1315 on Wednesday morning as world stock markets steadied from their latest drop following stronger-than-expected bank lending data from China.
The People’s Bank said new lending in the world’s second-largest economy – and its largest gold bullion consumer – jumping 13% year-on-year in August, the fastest pace since March.
Gold Chart of China new bank lending by month. Source: TradingEconomics via PBoC
Some 70% of August’s new lending went to household borrowers, rather than corporate loans.
Western government bond prices rallied, edging 10-year US Treasury yields down from their highest level since before the UK’s Brexit referendum in late June at 1.73%.
European stockmarkets stabilized after Wall Street closed 1.5% lower overnight, but ahead of next week’s US Federal Reserve decision on Dollar interest rates, global equities held some 2.5% down from this time last month.
“Gold is an option on the ineffectiveness, dare I say the stupidity of politicians,” said New York financial advisory Pension Partners’ CIO Edward Dempsey to CNBC overnight.
“The long end of the [interest-rate] curve is starting to sniff out a lot of fiscal stimulus [and] there’s a lot of populism [in Western politics] which will equal stimulus.
“[That] would be not very good for all that negative-yielding long debt but would be positive for gold.”
Ahead of Thursday’s Bank of England rate decision, “Attachment to the belief that the policy [interest] rate is all-powerful… stems from a fear of the redundancy of monetary policy,” writes fund manager and economist Eric Lonergan.
“This is erroneous. Monetary policy must simply be used to raise aggregate demand in other, more direct, ways,” says the author of 2014’s Money, which called for central banks “to be given helicopters” – a reference to the idea of creating and gifting money directly to government or private households to boost growth, rather than using it to buy assets under central banking’s current Quantitative Easing schemes.
India is meantime expected to report its first current account surplus with the rest of the world since 2007 for this calendar quarter, reports Reuters today, thanks primarily to lower imports of oil and gold.
India’s formerly world-leading gold demand sank in Q2 from the same period last year, according to data compiled by specialist analysts Thomson Reuters GFMS, with the traditionally strong Akshaya Tritiya festival proving “uneventful” for retailers and failing to stem the quarter’s 56% year-on-year drop in jewelry buying.
India’s gold investment demand also fell, down 40% year-on-year. The strongest period for gold bullion and jewelry demand is scheduled to peak with end-October’s Diwali festival.
UK data meantime showed a record 74.5% employment rate amongst the working-age population, while average wage growth slowed to 2.3% per year in the 3 months to July, just after the Brexit referendum.
Employment in the UK public sector fell to 16.5% of the working population, a record low down from 20% a decade ago.
Public spending on private-sector contracts almost doubled however during the 5 years of the Conservative-Liberal coalition government starting 2010.
Although dipping slightly in the first 6 months of 2016, UK government outsourcing in I.T. and business procesing rose 55% by cost in the second-half of 2015 according to data from management consultancy and ‘solutions’ firm Arvato.
January to June this year saw local governments across the UK raise expenditure on private-sector services by 84% compared with the same period in 2015.
Elsewhere, Russian-based VTB Bank – the country’s second largest lender according to newswire reports – has secured a deal to sell 15-20 tonnes of gold bullion into China over the next 12 months.
The world’s second-largest gold miner, Russia has faced US and EU sanctions over the Ukraine crisis, with Moscow’s central bank stepping in to buy 75% of 2014 and 2015’s domestic bullion output.
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