Gold News

Gold Flirts with $1300 on Solid US, Euro Inflation Data But China's Demand to Buy Supports

BUY GOLD prices in London's wholesale market erased the last of 2018's previous 4.9% gain on Thursday, falling back near $1300 per ounce after new US inflation data came in stronger than analysts forecast.
 
The PCE measure of US consumer costs rose 1.7% in January from the same month last year, the Bureau of Economic Analysis reported, holding the same pace of inflation as December.
 
Separate data from the 19-nation Eurozone meantime put inflation in manufactured goods prices at an 82-month high despite a slowdown in input costs, with activity across the world's largest single currency union remaining "robust".
 
World stock markets fell again ahead of new US Federal Reserve chief Jerome Powell speaking to lawmakers on monetary policy for the second time this week, potentially "dialling back" his seemingly hawkish tone of Tuesday.
 
Government bond prices rose, pushing 10-year US Treasury yields down to 2-week lows at 2.83%.
 
Two-year yields however held firmer near this week's 9.5-year highs, offering 2.24% per annum.
 
Trading down to $1305 as the start of New York trading approached, prices to buy gold have lost all but $3 of the New Year's earlier $60 gains per ounce, retreating as the Dollar rallied from multi-year lows on the currency market.
 
Platinum fell harder still on Thursday, losing $30 from Monday to hit 3-week lows at $966 per ounce and cut 2018's gain so far to 4.1%.
 
Silver was little firmer, also trading near 3-week lows at $16.28 but holding 3.9% down from New Year's Day.
 
Chart of US Dollar silver price. Source: BullionVault
 
Since hitting a 2-year high above $21 when the UK's mid-2016 referendum on quitting the European Union gave a narrow win to Brexit, silver has now retreated 23% in Dollar terms and almost 30% against the Euro.
 
Gold has meantime lost 5% in Dollars and 14% versus the Euro.
 
"The return of Chinese physical buyers to the market following the Lunar New Year holiday has helped to support gold prices," says the latest weekly analysis from strategist Jonathan Butler at Japanese conglomerate Mitsubishi.
 
Demand to buy gold via the Shanghai Gold Exchange's 99.99 Au contract has, over the last week, totalled 93 tonnes says Butler, beating the first week of last Chinese New Year by more than one-sixth.
 
"Average prices are only 2% lower than they were in the equivalent period," he goes on, "which suggests bargain hunting is not the only story – this bodes positively for demand going forward in what is traditionally a quiet season."
 
"There was modest demand from onshore Chinese sources [Thursday]," says the latest daily trading note from bullion bar refiners and finance group MKS Pamp. 
 
New data Wednesday showed that while China's trade surplus on goods grew yet again, its deficit on trade in services widened for the third month running in January.
 
"The deficit stood at about $21.8 billion last month," reports Xinhua of the state data, "up from $20.6 billion in December."
 
Beating the $20.3bn surplus in goods, that made China a net importer overall.
 
"China might face a trade deficit [in goods] in the next five to 10 years," reported the South China Morning Post in January, quoting former government advisor Zhang Yansheng, now a professor at Renmin University.
 
Neighboring Taiwan – seen as part of China by Beijing but outside Communist control since the end of WWII – should hold a referendum on declaring full and formal independence in April 2019, a group of formerly senior and current politicians said in Taipei on Wednesday.
 
Thursday's fall in world stock markets saw the EuroStoxx 50 index drop back to unchanged from this time last year, trading more than 6% below its price on 1 March 2015.
 
Germany's Dax index has now lost 5.9% from the start of February, while Italy's MIB has dropped 4.7% and Spain's Ibex index is down 6.5%.
 
Commodities fell as a group for the second day running, pulling Brent crude oil down to $64 per barrel even as wholesale natural gas prices held strong amid Europe's snow and cold snap.

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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