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Gold February 28, 2015 02:00:46 AM

Gold Bullion Jumps, Halves February's Euro Drop, Turkey Sees Heavy Exports on Lira Drop

Paul Ploumis
ScrapMonster Author
Gold bullion prices jumped mid-afternoon Friday, ending the month at $1214 per ounce on the London Fix
Gold Bullion Jumps, Halves February's Euro Drop, Turkey Sees Heavy Exports on Lira Drop

EDGWARE (Scrap Monster): Gold bullion prices jumped mid-afternoon Friday, ending the month at $1214 per ounce on the London Fix as after new data showed inflation in Germany and consumer sentiment in the US both stronger than analysts predicted.

US economic growth for 2014 also beat consensus forecasts, revised less badly to 2.2%.

Gold prices rose more sharply against the falling Euro, helping halve February's earlier 7.5% drop at €1085 per ounce.

Shanghai authorities plan a local "Fixing" for gold bullion kilobars in the world's No.2 consumer nation, a source told Reuters today, aiming to "complement" the global wholesale market's century-old benchmark – set to be updated next month to improve transparency and regulatory oversight. 

Over in India – long the world's No.1 gold consumer nation – tomorrow brings the 2015 Budget from Narendra Modi's pro-business government, widely expected to cut import duty on gold bullion from the current 10% to perhaps 6% or even 2%.

"Customers are enquiring but few are buying gold," news-wires quote one retailer in Mumbai's famous Zaveri Bazar, "as everyone is waiting for the duty cut to make big purchases."

Gold buyers in No.4 consumer nation Turkey meantime saw prices rise near 11-month highs on Friday, as the Lira fell to new record lows against the Dollar amid a political row over central-bank independence.

Recep Tayyip Erdogan, who moved from prime minister to president last August, today said that cutting interest rates would be a "service to the country", while his economic minister – Nihat Zeybekci – called the central bank "cowardly" for not cutting rates to 6% already.

Central bank governor Erdem Basci cut overnight borrowing rates to 7.25% on Tuesday.

"Gold lies behind [a] pleasant surprise in January," Reuters quotes economist Mehmet Besimoglu at Oyak Bank today, pointing to new data showing Turkey's smallest trade deficit since 2010.

"Exports would have fallen significantly if it wasn't for gold."

By value, net exports of precious metals last month reduced Turkey's trade deficit by $1.4 billion to $4.3bn, with gold outflows totaling perhaps 35 tonnes – almost twice the recent drop in gold reserves held at the Central Bank of the Republic of Turkey.

The CBRT has since the peak of the global financial crisis in 2011 enabled commercial banks in Turkey to keep gold bullion as reserves for their liquidity requirements. To source that metal, many banks encouraged private savers to put their own gold on deposit – gold which the central bank in turn then added to its own foreign exchange holdings.

But after rising 4-fold inside three years, Turkey's gold bullion reserves have now fallen for two months, dropping 18 tonnes to 515 tonnes by end-January – still the world's 12th largest national holdings – according to IMF data.

So far this year the Lira has lost 8% against the US Dollar, helping Lira gold prices rise over 10%.

Having dropped 12% in 2013, Lira gold prices held steady in 2014. Turkish household's demand for jewelry, bar and coin fell by almost one-third from 2013's five-year record according to data from market-development organization the World Gold Council.

Courtesy: www.bullionvault.com

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