Gold Price Jumps Above $1200 on China Rate Cut, Hits 4-Week Euro High as Draghi Vows "More Inflation", Japan Risks "Losing Control" of Yen Decline

in 21-11-2014

GOLD PRICES popped to the highest level this month Friday lunchtime in London, trading back above the $1200 level after the People's Bank of China cut its key interest rate for the first time in two years.   The unscheduled change in PBoC rates – down to 5.6% for 1-year loans – saw world stock markets and government bond prices rise, pushing longer-term market rates and yields lower.   Commodity prices also rose, rallying 0.7% on the Bloomberg Composite index to stand unchanged on the week as Brent crude oil shot back to $80 per barrel – a four-year low when first hit last month – and iron ore bounced from new 5-year lows.   "There is a decent amount of open interest around the $1200 level for Monday's Comex option expiration," says Germany's Commerzbank in a note, pointing to speculative betting on the direction of gold prices.   "An initial pullback is likely before the next leg of an up-move," says new technical analysis of gold price charts from French investment bank and London market maker Societe Generale.   The Euro currency today sank more than 1 cent to near this month's new two-year lows versus the Dollar after European Central Bank president Mario Draghi vowed to increase QE money creation "if necessary" to beat deflation in the 18-nation single currency union.   "We will do what we must to raise inflation and inflation expectations as fast as possible," said Draghi in a Frankfurt speech given in a personal capacity, rather than as ECB chief.   "If current policy is not effective enough...we would broaden even more the channels through which we intervene, altering the size, pace and composition of our [QE] purchases."   Draghi's comments help the gold price in Euros touch 4-week highs above €970 per ounce.   The Euro also sank 1.5% against the Yen, sliding from new 6-year highs, after Japan's finance minister Taro Aso said the decline in the Yen – aimed at boosted export sales and spurring domestic inflation – has been "too rapid".   Raising QE money creation to new record sums, the Bank of Japan risks losing control of the Yen's decline, warns FX strategist Steven Barrow at Standard Bank. Because "we can't believe that the BoJ can continue to buy ever-increasing proportions of the nation's debt without there being some sort of consequence."   Draghi's comments will "unequivocally increase the market's focus on EUR and EUR shorts [ie, bearish bets on the currency]," says a note from Citigroup analysts, "ahead of the December 4 policy meeting."   China's rate-cut news came after the close of Shanghai gold dealing for the week. But trading was solid in the main Au(T+D) contract, with premiums above global quotes reaching $3 per ounce.   With Ukraine's central bank meantime reporting a 35% drop in its gold bullion reserves – most likely to subsidize imports of natural gas, according to commodity analysts – the Dutch National Bank said today it has "adjusted [its] gold stock location policy", moving 122 tonnes from New York to Amsterdam the better to "balance" its holdings and boost "public confidence".

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Russia Continues to Buy Gold as Price Recovers $20 Swiss "No" Drop, Most Gold Miners Now "Under Water"

in 20-11-2014

BUY GOLD bids rose Thursday morning in London, recovering most of yesterday's $20 swing as the Dollar slipped on the currency market after mixed US inflation data.   Consumer prices slipped from September faster than forecast last month on the Bureau of Labor Statistics' index.   But on the seasonally adjusted index, and excluding "volatile" food and fuel costs, annual inflation rose to 1.8% near the upper-end of the last two years' pace.   Wednesday's minutes from the latest US Federal Reserve meeting "left no-one in any doubt," reckons one bullion-market analyst, "about their will to continue normalizing monetary policy."   "The precious metals will continue," says another, "to be guided by Dollar moves on the whole.   "Gold seems to have found a ceiling for the time being around $1200 and a floor around $1175."   Wednesday's $20 drop and bounce came on opinion polls showing that Swiss citizens are set to vote against all 3 questions in next week's referendum, turning down plans to cap immigration, raise taxes on wealthy foreign residents, and forced the Swiss National Bank to buy gold and never sell it again.   Russia's central bank continued to buy gold in October, new data showed today, adding 1.6% to reach 1,170 tonnes of bullion reserves.   Central-bank governor Elvira Nabiullina announced to the lower house of Russia's Duma on Tuesday that the state has added 150 tonnes of gold so far this year.   India's surge in demand to buy gold, meantime, has not yet led the government to decide on fresh anti-import rules, a Finance Ministry spokesman is quoted today by the Financial Times – contradicting Wall Street Journal and Reuters quotes from a "source" earlier this week that new curbs were due "as soon as [last] Tuesday."   Gold industry trade body the All India Gems & Jewellery Trade Federation (GJF) asked its members to cease selling investment coin and bar on Wednesday.   The government "have not taken the final decision so far," the FT quotes the Finance Ministry's D.S.Malik.   Prices to buy wholesale gold through the Shanghai Gold Exchange today edged lower in Yuan terms, but Chinese premiums – over and above comparable London quotes – rose to a 1-week high of $2.60 per ounce by the close of trade.   South African-based Gold Fields (JSE:GFI) – the world's 7th largest gold mining business – meantime posted third-quarter profits down 22% from the spring, but said it could "ride through" this month's price drop to new 4.5-year lows because its all-in break-even cost is $1090 per ounce, including repaying debt.   Market prices to buy gold bottomed on 7 November at $1132 per ounce.   "The industry [however] by and large is under water," CEO Nick Holland went on, forecasting "further writedowns" and "curtailed production...but it will take some time to filter through."   Major refiner Johnson Matthey (LON:JMAT) today said its underlying profits grew 10% year-on-year in Q3, but revenues for its precious metals business fell by one third.

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When Gold US dollar become directly correlated

in 20-11-2014

Changes in gold are sometimes driven upward not by relative weakness in the U.S. dollar to other fiat currencies, but, instead, by flight from all paper currencies.

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Gold Prices Lose "Psychologically Important" $1200 Level Ahead of US Fed Minutes, Swiss Gold Poll Also Eyed

in 19-11-2014

GOLD PRICES recovered  but then slipped again below what analysts called the "psychologically important" level of $1200 per ounce Wednesday morning in London, ahead of US Federal Reserve minutes from the central bank's latest policy meeting.   "Participants most likely are also awaiting news on the latest Swiss gold referendum poll" – due at 5pm European time, with the vote itself on Sunday 30 November – says another trading desk.   After new factory-gate data showed US producer prices rising 1.7% annually in October, tomorrow brings the latest consumer price index.   "I see symmetry [in the 2.0% inflation target] as important," Minneapolis Fed president Narayana Kocherlakota said yesterday, repeating a speech made last week after publishing his "dissent" from the October vote, which kept interest rates at zero, tapered the last of the central bank's new monthly QE asset purchases, and again pointed to rate rises sometime in 2015.   "Without [stressing] symmetry, inflation might spend considerably more time below 2 percent than above 2 percent...creat[ing] doubts in households and businesses...unmooring inflation expectations...and reduc[ing] the effectiveness of monetary policy as a mitigant against adverse macroeconomic shocks."   World stock markets meantime rose ahead of the Fed minutes on Wednesday, while US Treasury bonds fell – edging yields higher – and industrial commodities bounced 0.5% but grains slipped amid the ongoing record US harvest.   Gold's price rally through $1200 on Tuesday was "probably due to the covering of short positions" by bearish traders, reckons Germany's Commerzbank.   "We didn't see much," says Swiss refinery group MKS, "in the way of Chinese physical demand to support the market today."   Lower Shanghai volumes, however, contrasted with a rise in Chinese gold prices relative to London quotes, recovering to $1.50 per ounce from Tuesday's two-week low.   "The recent recovery in gold prices stalled on Tuesday," says a technical chart analysis from Swiss bank and London market maker UBS, pointing to "resistance at $1207.95" – the 62% retracement of the last 6 weeks' drop.   "Now, we expect the bearish trend to resume."   Further out, however, analysts at Standard Chartered today raised their gold price forecasts, targeting a rally to average $1245 in 2015 and then $1330 the year after.   "The current backdrop for gold prices," says the note, "is one the weakest ever because of the multiplicity of factors supporting a bearish view. "However, we see the tide turning...most particularly [because] Dollar bullishness will likely fade."   With the Fed's meeting notes due later on Wednesday, the US Dollar today hit fresh 7-year highs against the Japanese Yen, but retreated from an earlier rise vs. the Euro to touch this month's low at $1.2570 for a third time.

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Gold Price Drops $20 on Swiss Gold Vote "No" Opinion Poll

in 19-11-2014

GOLD PRICES sank 1.7% late in London trade Wednesday, erasing most of the last week's gain as the latest opinion poll of the upcoming Swiss referendum put the "Yes" camp well short of a majority.   Prompted by a petition under Switzerland's "direct democracy" rules, the referendum will on Sunday 30 November ask voters whether the country's central bank should boost its gold holdings to 20% of reserves from the current 8%.   The Swiss National Bank could then neither sell gold in future, nor store any of its holdings – likely swollen from 1040 tonnes today to nearer 2,500 or more – outside the country.   "The recent recovery in gold prices stalled on Tuesday," says a technical chart analysis from Swiss bank and London market maker UBS, pointing to "resistance at $1207.95" – the 62% retracement of the last 6 weeks' drop.   "Now, we expect the bearish trend to resume."   Gold prices dropped $20 per ounce within minutes of the opinion poll being released.   Conducted by survey group gfs.berne for the SRG television station, it said only 38% of respondents plan to vote "Yes" to the gold question on next week's referendum.   All initiatives need over 50% to pass, with a majority of Switzerland's regional cantons required as well. Having ignored the approaching ballot's implications for central bank gold demand, a growing number of analysts have recently said it could spike prices, even turning around the metal's 3-year downtrend.   Further out, and regardless of the Swiss result, analysts at Standard Chartered today raised their gold price forecasts, targeting a rally to average $1245 in 2015 and then $1330 the year after.   "The current backdrop for gold prices," says the note, "is one the weakest ever because of the multiplicity of factors supporting a bearish view.   "However, we see the tide turning...most particularly [because] Dollar bullishness will likely fade."   With notes from the US Federal Reserve's most recent policy meeting due out later on Wednesday, the US Dollar today hit fresh 7-year highs against the Japanese Yen, but retreated from an earlier rise vs. the Euro to touch this month's low at $1.2570 for a third time.   World stock markets meantime rose, while US Treasury bonds fell – edging yields higher – and industrial commodities bounced 0.5% but grains slipped amid the ongoing record US harvest.   Gold's price rally through $1200 on Tuesday was "probably due to the covering of short positions" by bearish traders, reckons Germany's Commerzbank.   "We didn't see much," says Swiss refinery group MKS, "in the way of Chinese physical demand to support the market today."   Today's opinion poll on the Swiss gold vote also said the other two initiatives put to the electorate on 30 November, to reduce immigration and tax wealthy foreigners more heavily, look set to fail as well.

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Gold Price Pops Over $1200, "Sell" Say Analysts But Shanghai Trade Solid After Post-2013 Crash Record

in 18-11-2014

GOLD PRICES slipped back from new 3-week highs above $1200 Tuesday lunchtime in London.   Gold retreated 1% to $1193 per ounce as Western stock markets followed Japan higher on news of a "snap" election in Tokyo, called after yesterday's data showed the world's third largest economy falling back into recession.   New US data today showed producer prices – excluding energy and food – rising 1.8% year-on-year in October, the fastest pace since this spring's near 18-month high.   US Treasury bonds ticked higher in price Tuesday, nudging interest rates down, other major government bonds rose faster, widening the extra return offered by Washington's debt.   The Dollar meantime failed to rise near this month's two-year highs against the Euro, or top today's earlier 7-year high vs. the Yen.   Commodities slipped 0.5% as a group, while silver lagged the rise in gold prices to trade below last week's finish at $16.31 per ounce.   "Gold has shrugged off the impact of a stronger Dollar in recent days," says US broker INTL FCStone's Ed Meir, citing the move higher to "modest short-covering and growing expectations about further easing being pursued by global central banks."   Tuesday morning's rally "triggered some stops", says a London dealing des.k, referring to pre-set orders to sell at a certain level.   "Personally," says David Govett at London brokers Marex Spectron, "I would be looking to sell any rally above $1200, with a view to the market coming lower again over the next few weeks."   Still targeting $1100 or below over the next 1-3 months, technical chart analysis from French investment bank and London bullion market maker Societe Generale meantime says gold prices have "re-established above the key level of 1180" – the low of June and Dec. 2013 as well as October 2014.   But gold is only "undergoing a corrective rebound," SocGen adds, targeting $1213 "and possibly $1235/40" before falling again.   Fundamentally, "Gold is still in the process of unwinding the craze that it enjoyed from 2000 to 2011," reckons Doug Ramsey of $1.6 billion asset manager the Leuthold Group.   "It was the commodity that got the public enamored and went up and topped over $1900, and that whole process of deflating that excitement that built up over 11 years is still in process."   Meantime in China, the world's No.1 producer, consumer and importer of gold in 2013, the Shanghai Gold Exchange today said it is cutting the margin downpayments it requires from traders by 1%, Reuters reports.   Trading volume in Shanghai's main gold contract today equaled $0.9 billion, in line with the last 3 months' average but more than halving from Monday – the busiest day in Shanghai gold trading since the Gold Price Crash of April 2013.

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