Gold News

Gold crashes through $609 - who's selling?

Gold sank in US trading after the much-anticipated US jobs report came in well ahead of Wall Street's expectations.

Gold dropped to $609 per ounce at the PM Fix in London. It was marked at $625 only four hours earlier. Technical analysts had cited $620 as key support.

"You're getting liquidation on the back of the strengthening Dollar," said Michael Guido, director of hedge-fund marketing at Societe Generale in New York to Bloomberg. "Obviously this number is a big surprise."

The Labor Dept. said at 13:30 GMT on Friday that the US economy added 167,000 jobs in Dec. Economists had been expecting nearer 100,000. The data also showed average US wages rising by 0.5% against 0.3% as expected.

A cut in US interest rates any time soon now looks unlikely – and that has sent the US Dollar higher across the board. But gold's sharp losses also extend to Sterling, Euro and Yen investors.

Gold has now lost nearly £10 per ounce for British investors. French and German buyers are offered a €13 discount from this time last week.

"Right now investors are cautious about stepping into gold given this week's Dollar strength," says David Holmes, director of precious metals sales at Dresdner Kleinwort in London. Yet retail investors are sticking with it, according to data from the gold ETFs.

Exchange Traded Gold says it's holding 18.142 million ounces of gold today, barely changed from last week after a 3.3% rise in volume during Dec.

So if it's not retail investors selling out, who's dumping gold? Gold has fallen $22 this week, a 3.5% drop. The US Dollar, meantime, has risen only 1.4% on a trade-weighted basis. And news earlier this week that a major European central bank bought gold – instead of selling it – at the end of Dec. has signally failed to support the market.

"For the clueless out there who still don’t understand," said an email to BullionVault on Thursday, "the gold market is managed by a Gold Cartel...Free markets do not trade this way."

Oh yeah? No one ever pretended the gold market was free or transparent. Central banks, after all, hold more gold than anyone else. Why act surprised if they try to rig prices?

Nor is gold a free ride to easy gains, either. Its volatility since the start of 2006 has wildly outstripped the volatility of US equities, for instance. And all this while, the global market turns over 1,500 tonnes every day or more.

If the world's central banks have indeed lent and loaned 3,000 tonnes into the market, as some conspiracists claim, they're up against a huge international market that's fragmented, volatile and opaque.

And whatever they might be up to in the spot market for gold, central bankers are doing all they can to send its price soaring in future. Click here for the full story...

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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