Gold News

"Buy Gold" Tops Safe-Haven Choices in Jan.2014 as Emerging-Market Drop Hits West

BUY GOLD bids in London took prices above $1254 per ounce Friday lunchtime, reversing one-half of the week's prior 2.5% losses as world stock markets fell again.
 
Prices to buy gold in Euros rose to recover all this week's losses as the single currency fell after news of a drop in consumer-price inflation to 0.7% across the 17-member union.
 
Regaining €928 per ounce, gold priced in Euros was on track for its highest weekly close since mid-November.
 
Asia's emerging markets meantime closed down 4.9% from the start of January, Eastern European stocks had lost 8.0%, and Latin American stocks stood 10.7% lower.
 
Excluding Asia – where demand to buy gold now accounts for well over 1 ounce in every two sold worldwide – emerging-market equities globally have fallen 9.4% on MSCI's maths.
 
Developed-Western stockmarkets were set to end January some 4.5% lower as New York trading began Friday morning.
 
"Gold is currently the top performer among its safe-haven peers," says Swiss investment and London bullion bank UBS, noting that gold has beaten both Treasury bonds and US Dollars in January.
 
"Gold's outperformance took hold," UBS  goes on, "when emerging-market turmoil emerged and risk appetite abated."
 
Copper prices have now put in their "longest losing streak since 1998," says Bloomberg, blaming fears of a slowdown in China.
 
"This week we've seen synchronized volatility," the newswire quotes strategist Christian Stocker at UniCredit Bank in Munich, "with very weak currencies and disappointing Chinese manufacturing figures.
 
"We need an increase in earnings momentum to see stock prices go higher."
 
Already by Wednesday, Western investors had pulled over $7 billion from emerging-market ETFs, according to Bloomberg data.
 
New York-listed SPDR Gold Trust (ticker: GLD) the world's most valuable exchange-traded fund at its peaks in 2011, yesterday added metal to the gold backing its shares for a second day running, climbing to 793 tonnes – a weight first reached in January 2009.
 
Thursday marked the GLD's first two-day run of additions since 6 Dec. 2012.
 
"Near-term, gold fundamentals look bearish," reckons Friday's commodities note from ANZ Bank.
 
Chinese wholesale demand to buy gold "is sidelined for the next few weeks" by the Lunar New Year holidays, says the Australian bank's report.
 
But while "the gold fear-trade is dormant," says UBS's Edel Tully, "there is scope for revival" if the emerging-markets turmoil continues.
 
Looking at hedge-fund betting in US futures, "The market is not positioned for a rally," says Dr.Tully. So a "relatively modest" switch to buy gold futures "could generate a much greater price reaction."

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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