GOLD PRICES were stuck below $1,300 on Wednesday morning in London, as strong US housing data and American stock markets bolstered the US economy. Gold touched $1,294 per ounce by 10:45am in London.
A currently strong US dollar further weighed on the gold price.
Silver remained close to the 2-month low to which it dropped yesterday, trading at $19.47 per ounce on Wednesday morning. Other precious metals also came under pressure with platinum at $1,430 and palladium at $877 per ounce.
While the American stock markets rose, the European indices halted their recent rally with the German DAX down -0.41%, the British FTSE -0.29% and the French CAC 40 -0.45%.
Both gold and silver ETFs have increased their holdings this week. The world’s largest gold-backed exchange traded fund SPDR Gold Trust (NYSE Arca: GLD) increased by 0.19% and rose to 799.19 tonnes. SPDR Gold Trust is one of the ten largest holders of gold worldwide and their shares have been sought by established hedge fund managers such as George Soros and John Paulson.
On Tuesday, the gold price slipped after the US Census Bureau announced that both the US housing starts and building permits came out better than expected. Housing starts in July were up by 15.7% from June. The surge suggests that the housing market has recovered after stalling in the second half of 2013. The housing market index that was published on Monday by the NAHB also revealed that the US homebuilder confidence rose to 55, compared to 53 in the month before.
Meanwhile, investors were expecting the FOMC minutes which will be released later today. The report by the Federal Open Market Committee reflects the Fed’s monetary policy outlook and future interest rates and is hence considered a possible driver for gold. Furthermore, the Central Bankers symposium in Jackson Hole is due to start on Thursday.
“With possible market expectation of a dovish report, the event risk and price bias should lie towards a more hawkish report. This would, in general, be negative for precious metals,” said analyst Walter de Wet from Standard Bank.
In the meantime, Russia’s president Vladimir Putin and his Ukrainian counterpart Petro Poroshenko agreed on holding talks as part of a summit in Minsk. It will be their first meeting since the D-Day anniversary at the beginning of June. A gun battle still broke out in the centre of the rebel-held Ukrainian city of Donetsk yesterday.
Furthermore, the Islamist terror organisation Isis claimed to have beheaded a US journalist identified as James Foley. According to the UK foreign secretary Philip Hammond, the video appeared to be genuine.
Back in Europe, the rebound of Europe’s largest economy, which contracted in the second quarter, is said to be impeded by the international geopolitical tensions. “The economic outlook for the German economy has clouded over the middle of the year in response to unfavourable international news,” commented the Bundesbank in its monthly report that was released on Tuesday.
By Steffen Grosshauser