Gold Prices Drop to "Short-Term Support" as Argentina Hits Default, US Fed Member Votes Against Delaying Rate Hikes

in 31-07-2014

GOLD PRICES fell to 6-week lows Thursday lunchtime in London, touching $1286 per ounce as Western stock markets also fell and the Dollar rose amid news that Argentina is in default on its government debt.   New data following yesterday's strong growth in GDP showed the strongest rise in US employment costs since 2008, up 2.0% in the year to end-June.   Chinese equities had earlier risen while the rest of Asia held flat.   The US Dollar rose to new 10-month highs vs. the Euro after new Eurozone data showed the slowest pace of consumer-price inflation since late 2009 in the 18-nation currency zone.   "Gold could find support from Argentina's renewed insolvency," reckon commodity analysts at Commerzbank in Frankfurt.   Failing to reach agreement with hedge funds led by Paul Singer's Elliott Management – who bought $1.5 billion of bonds after $144bn were restructured in 2005 following the 2001 default – Argentina was deemed to be in part default by the S&P ratings agency overnight.   "It is now somewhat unclear," says Commerzbank, "how the events in Argentina will affect the future debt rescheduling of other countries, especially emerging economies."   The Buenos Aires stock market rose 7% yesterday as the likely default became clear. The Peso today slipped to new post-restructuring lows.   Looking at short-term charts, gold investment "is taking support," reckons a technical analysis from French investment bank Societe Generale, "at the steep trend line" running down from mid-July's 15-week high at $1345 per ounce.   "Hourly indicators are [also] holding support," it adds, pointing to a "downside floor" at $1288-92 per ounce.   But further out, says Australia's ANZ Bank, the United States "robust GDP numbers [have] also created a headwind for gold as Treasury bond yields and the US Dollar rose."   Wednesday's US Federal Reserve meeting ended with a 9-1 vote in favor of keeping rates at zero and reducing the monthly pace of QE by another $10 billion to $25bn.   The first dissenting vote since Janet Yellen took the chair this year, Philadelphia Fed president Charles Plosser objected to the central bank's assurances of keeping rates at 0% for a "considerable time" after its QE asset-purchase program ends.   The US Dollar has now gained 2.2% against the Euro since the Fed began "tapering" its QE asset-buying program in December.   Ten-year US Treasury yields have fallen one-third of one percentage point, reversing the rise made during the second-half of 2013.   Gold prices have risen 5.2% and the S&P 500 stock index has risen 8.8%.   "Gold is a low or zero-yield asset," says a note on gold prices and US Fed rates from Japanese trading house Mitsui. "Tighter monetary policy and higher interest rates should therefore pose a downwards threat to the gold price."   The fact gold is primarily priced and dealt in Dollars means a rising US currency would also be "bearish".   However, Mitsui believes that any US tightening "is likely to occur later than the market suggests" – and that delay "should be bullish for gold in the short to medium term before rates actually start to rise."

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Gold Prices "Hit by Strong Dollar" as US GDP Shows 4.0% Surge, FOMC Statement Due

in 30-07-2014

GOLD PRICES slipped out of tight range below $1300 per ounce Wednesday lunchtime in London, touching a new low for this week at $1293 after key US data showed much faster growth than expected.   Asian and European stockmarkets had also held flat – as did major government bonds – but US equity futures pointed higher as the New York opening approached.   Wednesday's US GDP figures for the April-June quarter showed 4.0% annualized growth after Q1's surprise 2.9% drop.   The latest monetary policy statement from the Federal Open Market Committee of the US central bank was due later in the day.   "Gold has been pressured by a stronger US Dollar," says one commodities trading desk in a note.   "We may," adds London brokerage Marex Spectron, "see some small short-covering" by bearish traders closing their bets against gold prices "ahead of the FOMC release tonight.   "But on the whole I think we are in for a long and dull day."   Analyst Edward Meir at US brokers INTL FC Stone said overnight that today's GDP reading "will likely be more important" than the US Fed's statement, because "if growth substantially exceeds the 3.2% expected, we could see the Dollar move higher still."   The US Dollar today knocked the single Euro currency down to new 8-month lows beneath $1.34 on the FX market.   That buoyed gold prices for Eurozone investors near €967 per ounce after the US GDP data – down only 0.7% for the week so far against the Dollar price drop of 1.1%.   "Many market participants are clearly waiting for the outcome of the two-day meeting of the US Federal Reserve," says Eugen Weinberg, senior commodities analyst at Germany's Commerzbank.   But with Tuesday's US consumer confidence data hitting its highest level since 2007, "positive economic data could dampen demand for gold investment as a 'safe haven' on the one hand," says Weinberg, "and [also] fuel speculation about faster and sharper US interest rate hikes by the Fed on the other.    "This is preventing gold prices from climbing."   Private-sector data on US jobs – widely seen as a forerunner of Friday's official non-farm payrolls report – meantime missed analysts' forecasts for July.   The ADP Payrolls Report said 218,000 net new jobs were added in the US this month, down from last month's 281,000 and below consensus expectations of 230,000.   Commodity prices slipped early Wednesday, holding crude oil near 2-week lows.   Silver tracked gold prices, also trading 0.8% down for the week so far at $20.58 per ounce.   Gold prices in Shanghai – central market for the world's No.1 consumer nation – ended the day lower in Yuan, but extended their premium above comparable London quotes to more than $2.50 per ounce as the Chinese currency held near its strongest Dollar level since mid-March.

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Gold Prices "Recovering" But Move "Sideways" Ahead of "Auto-Pilot Fed" and US Jobs Data

in 29-07-2014

GOLD PRICES held in a tight range again on Tuesday morning in London, fixing at $1307.50 per ounce – unchanged from last week's finish – as European stock markets also moved sideways ahead of this week's key US data releases.   Wednesday brings US GDP for Q2, plus the latest Federal Reserve policy statement.   Friday then brings the latest US payrolls data – often a key moment of volatility in the gold price.   The US Dollar rose Tuesday, pushing the Euro down to its lowest level of 2014 so far.   US Treasury bond yields fell as prices rose, but German Bund yields fell faster, hitting new record lows on the 10-year at 1.13% per year – less than half the yield now offered on comparable US debt.   Gold prices are trading "sideways" says Australian bank ANZ "as the market awaits [that] swathe of data from the US."   But "once the usual five minutes of [Non-Farm Payrolls] fun is out of the way," says London broker Marex Spectron's David Govett, "I don't really see gold prices deviating from the ranges they are currently in.   "I can see very little coming out from the Fed that will disturb the tranquillity" on Wednesday, he adds.   "The Fed is pretty much on 'autopilot' at the moment," agrees Germany's Commerzbank in a commodities note. But "any surprising phrasing in [Wednesday's] press release could well spark more dramatic price movements in the wake of the meeting."   Meantime, "gold has sold off to and is recovering from its 200-day moving average at $1286," says Commerzbank's technical analyst Karen Jones in the bank's weekly chart book.   "We look for the [gold price] to remain under pinned here and resume its ascent towards the 2013-14 resistance line at $1362.92 during the summer."   More neutral on gold prices, "The yellow metal is consolidating above strong support at $1280.52," says a note from Swiss bank UBS, pointing to the 62% retracement of the June-July advance from $1241 to $1335 per ounce.   Major trust fund holdings of gold bullion to back exchange-traded shares were unchanged Monday, with the SPDR Gold Trust (NYSEArca:GLD) steady at 801 tonnes – down some 40% by weight from the peak of end-2012.   Open interest in US Comex gold futures and options increased very little as the August contract ended the day unchanged.   In the physical gold market meantime, the London Bullion Market Association – trade body for the world's wholesale center – said it has been asked to help gather and review proposals for developing the 100-year old daily Gold Fix process.   Pooling their resources to enable clients to deal any size, four bullion banks – working as the London Gold Market Fixing Limited – currently meet by phone at 10.30am and 3pm to find the one single price which clears the most business.   "The bullion market needs, initially, to concentrate on the London Silver Price implementation," says LBMA chief executive Ruth Crowell, welcoming the LGMFL's request and pointing to the Silver Fix replacement set to start two weeks Friday.   "We look forward to focusing on gold from late August," Crowell adds, saying the new Gold Fix process will likely be chosen in September to be implemented fully by year-end.

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Gold Bullion Sits Tight, "Geopolitics Scares Off Bears", Ahead of US Fed Meeting & GDP Data

in 28-07-2014

GOLD BULLION prices held in a tight range around last week's close of $1307 per ounce in Asia and London on Monday, while the US Dollar ticked down from 1-month highs ahead of this week's key GDP data and Federal Reserve statement on monetary policy.   Commodity markets were flat overall as crude oil slipped but lead and platinum rose.   Russia's stock market fell to 12-week lows, as did its Ruble currency, ahead of the European Union meeting to finalize new sanctions against Moscow over its support for separatists in Ukraine.   The Hague-based Permanent Court of Arbitration today ordered Moscow to pay $50 billion in compensation to the former majority shareholders of Yukos, the oil company broken up and re-sold after founder Mikhail Khodorkovsky was jailed on political charges.   New data today showed activity in the US services industry holding this month at the strongest since early 2010.   Pending US home sales however fell in June for the first time since February, separate figures showed.   United Nations' secretary general Ban Ki-Moon meantime said Gaza is in a "critical condition" and called for a 12-hour truce between Hamas and Israel to be extended "in the name of humanity".   "The Fed is likely to sound another cautious note on interest rates at [Wednesday's] meeting," says the latest precious metals analysis from Jonathan Butler at Japanese conglomerate Mitsubishi, "but any signs of an early rate tightening will be seized on by gold bears."   Speculative traders last week cut their total number of bearish bets on gold futures and options to the lowest level since late March, new data from US regulator the CFTC showed after Friday's close.   That took speculative traders' overall bullish position – net of those bearish bets – up to a notional 563 tonnes of gold bullion, some 70% greater than the last 18 months' average.   "Ongoing geopolitical tensions," reckons a precious metals note from Swiss investment and London bullion bank UBS, "likely caused nervousness among shorts, prompting them to close out positions."   "The [net bullish] speculative position in precious metals is high," says the latest commodities analysis from Standard Bank, noting that – as a percentage of open interest in US derivatives contracts – "gold, silver and platinum all have net speculative length close to the highest level seen this year, or well above the 5-year average level, or both."   With bullishness already elevated, "their prices are likely to struggle to regain upward momentum," says Standard Bank's Walter de Wet.   US investment bank Morgan Stanley says its commodity analysts now expect "a sustained, re-acceleration in global growth, characterised by less negative surprises than we have seen over the past year – most of which boosted gold prices."   But London bullion market-maker Credit Suisse also notes three "unusual headwinds" – of tighter fiscal policy, relatively tight credit in US mortgage markets, and low household expectations for future wage growth – which it believes will prevent the US Fed under Janet Yellen from raising interest rates anytime soon.

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Gold Price "Can't Rise" as Weak Asian Demand, Technical "Correction" Take Out 50- and 100-Day Moving Average

in 25-07-2014

GOLD PRICES headed for their lowest Friday close in 6 weeks in London today, trading sideways at $1295 per ounce as European stock markets failed to follow Asian equities sharply higher on the day.   With Shanghai's stock market closing the week 2.9% higher, Shanghai gold prices ended 1.5% down at the lowest since 19 June.   India's Gems & Jewellery Export Promotion Council said gold bar imports to the world's former No.1 consumer nation doubled last month from the same month in 2013.   But in what Reuters calls "a seasonally slack period", improved supplies have seen Indian premiums over London gold prices halve this week, falling as low as $5 per ounce vs. late 2013's record level of $160 when the current import curbs first hit.   "In our opinion," say analysts at Commerzbank in Frankfurt, "the weak gold demand figures out of Asia – not only China – preclude any rise in gold prices."   "Positive economic data put a dampener on the gold market," reckons an Asian trading desk quoted by Reuters, "as risk assets caught a bid and safe-haven buying dried up."   "It will be political events that provide the market with some potential direction," says a Singapore dealing note after warning yesterday morning that gold and silver "look[ed vulnerable to a correction lower."   Islamic State fighters seeking a medieval caliphate today claimed they'd over-run a Syrian army base.   The Gaza death-toll from the last fortnight's conflict with Israel was today put above 800.   Moscow's stock market meantime fell hard as Dutch and Australian police reached the crash site of Malaysian flight MH17 in eastern Ukraine, dropping 2.1% for the week – but holding well above this spring's 4-year lows – after the Russian central bank surprised FX traders with a half-point hike on interest rates.   Now at 8.0%, Russia's key overnight rate is only just ahead of Russia's latest inflation reading.   The Ruble rallied against the Dollar, but the British Pound fell to 1-month lows as UK GDP data met analyst forecasts for 3.1% annual growth.   That buoyed the gold price in Sterling at £762 per ounce, down 0.7% on the week.   "Gold plunged Thursday," says London market maker Scotia Mocatta's New York desk in its daily note, "falling below both the 100-day and 50-day moving averages."   What Scotia's analysts call "bearish trend and momentum indicators" are now "providing for ample room to the downside."   "The current correction should fetch 1285/81, mid-June highs," says technical analysis from Societe Generale, after the metal "failed to establish itself" at late-June's return to April's high of $1331.   Gold prices, the SocGen note concludes, will now need "a break above [July's] steep resistance line" coming down from the peak at $1345 and now sitting at $1300 "to prompt positive signals."

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Gold Prices "Range Bound", Dip Below "Psychologically Important" $1300 as Consensus Forecasts Fresh Falls

in 24-07-2014

GOLD PRICES dipped Thursday in Asian trade, holding below what one bank's trading desk calls the "psychologically important" level of $1300 per ounce for the first time in a week.   New manufacturing data showed strong growth for July in both China and the Eurozone, where service-sector activity also expanded at its fastest pace since 2011 on the Markit consultancy's PMI survey.   After the China Gold Association said Wednesday that first-half demand in the world's No.1 consumer nation fell 19% by weight vs. H1 2013's record surge, new data today said gold bullion imports to China through Hong Kong – net of exports – hit a 17-month low in June.   Dropping some 30% in the first six months of last year, Yuan gold prices rose 5.4% between Jan. and end-May 2014, adding a further 4.4% last month.   "Acceleration in the US economic recovery story remains the key driver behind our lower gold price forecast," says a note dated Wednesday from US investment bank Goldman Sachs.   Repeating its call for gold to end the year at $1050 – below 2013's three-year lows – "US economic releases have continued to [improve] while tensions in Ukraine have escalated, keeping gold prices range bound near $1300."   New data Thursday said US claims for jobless benefits were the lowest last week since 2006.   "Investors going risk-on into equities pushed the gold price lower," reckons the commodities team at Germany's Commerzbank in Frankfurt. "Silver followed gold's trail."   "The rally in US equities continues to be a headwind for gold," agrees Australia's ANZ Bank, "despite safe haven buying providing some support to prices."   Warning today of a "dire situation" in Gaza, the United Nations also reported that bandit army the Islamic State has ordered mass mutilation of women and girls in the Iraq city of Mosul, under its control since early June.   The Financial Times meantime reports that a pro-Russian separatist leader in eastern Ukraine "came close to an admission of guilt" for killing 298 civilians on Malaysian flight MH17 last week, saying his forces did control a missile launcher of the type believed to have downed the airliner.   "We are mildly bullish for gold this year," Reuters quotes analyst David Jollie at Japanese trading house Mitsui, "but we feel many of the gains may already have been made."   That contrasts with the newswire's survey of 31 market analysts, which earlier this week showed consensus forecasts of a slight annual drop in 2014, with gold prices averaging $1255 in the last 3 months of the year against $1290 over the first half.   While US Fed tapering of its quantitative scheme "should [now] be fully priced in", says Jollie, the end of that process will however spur "market uncertainty" with regards to when the central bank may raise rates.

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