Gold News

Investors "Hesitant" to Buy Gold, GLD Sheds Metal After Malaysia-Airliner Crash Sees Sharp Price Spike

BUY GOLD prices slipped out of a tight range above $1308 per ounce in London Friday lunchtime, dropping 1.5% from yesterday's spike on news of the Malaysian airliner shot down over Ukraine.
 
Jumping over $20 per ounce inside an hour of the first report, prices to buy gold in wholesale bars drifted in this trade Friday towards a 2.4% loss for the week at $1307.
 
Gold's weekly drop was tamer for Sterling and Euro investors as those currencies fell vs. the Dollar, despite a marked and unexpected drop in US consumer confidence on the Reuters/Michigan survey.
 
Asian stock markets earlier closed flat, but Europe fell for a second day, erasing the week's earlier gains.
 
US stock markets rose to halve Thursday's 1.2% drop from near this month's new all-time highs.
 
"Comex [ gold futures] open interest continues to decline," says Friday's note from Standard Bank's commodities analysts.
 
"Together with yesterday's price movement, it suggests that [bearish] shorts were covered, as opposed to new [bullish] longs added."
 
Moreover, Asian demand to buy gold is "still very price-sensitive" after 2013's surge on falling prices, and Standard Bank says it expects a decline in demand "if the gold price rallies too high."
 
Prices to buy gold on the Shanghai Gold Exchange ended the week 2.0% lower in Yuan terms, closing Friday at a $2 per ounce discount to the world's benchmark of London settlement.
 
"Geopolitical gains tend to be short lived," says commercial and bullion bank HSBC's precious metals team in London, agreeing with Standard that Thursday's spike was due to bearish traders closing their bets rather than new "safe haven" demand.
 
Commodity indices eased back Friday, with wheat prices trimming yesterday's 2.4% jump, the largest 1-day rise since April.
 
Silver tracked prices to buy gold, unwinding Thursday's spike above $21 per ounce to near the weekend 2.7% down from last Friday.
 
Russian president Putin today called for a cease-fire in Ukraine to allow proper investigation of the airliner's downing. The UN Security Council meantime held an emergency meeting.
 
Contrary to Thursday's price action, the giant SPDR Gold Trust (NYSEArca:GLD) shed 3 tonnes of gold from the metal backing its trust-fund shares, taking this week's outflow to more than half the previous week's 10.5-tonne addition.
 
Current GLD holdings of 803 tonnes marked a 5-year low when first reached last December, on the way down from end-2012's record 1350-tonne hoard.
 
"Safe-haven driven rallies this year have been short-lived," says HSBC's fellow London market-maker UBS, and "we expect much the same on this occasion."
 
Longer-term, would-be bullish gold investors are now "likely hesitant given gold's painful and costly retreat earlier this week."

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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