Gold News

Fresh Price Slump Spurs Demand to Buy Gold in Middle East, But China a "Heavy Seller" as Dollar Rises After Republican Win

BUY GOLD bids rose $8 per ounce from new 4.5-year lows lunchtime Wednesday in London as the first US data to greet the Republicans' sweeping mid-term election victory showed better than expected jobs growth for October.
 
The private-sector ADP report – a precursor to Friday's official non-farm payrolls data – beat Wall Street forecasts of 220,000 net new jobs with a print of 230,000 for last month.
 
Prices to buy gold had earlier sunk in late Asian trade Wednesday, falling beneath $1140 per ounce for the first time since April 2010 as the US Dollar rose on the currency market after the Republican Party took the Senate and retained control of Congress for the first time in 8 years.
 
The Japanese Yen fell to a new 7-year low versus the Dollar as Bank of Japan governor Kuroda said there were "no limits" on its quantitative easing – raised last week by one-third to $0.7 trillion per year.
 
Major government bond yields ticked higher as prices slipped and European stock markets rose over 1% Wednesday morning.
 
Commodity prices sank again, with iron ore hitting new 5-year lows as Brent crude oil fell near $82 per barrel.
 
Silver prices fell 5% on the day, dropping $2 per ounce from a week ago and extending their fall in 2014 so far to 22% at new 57-month lows of $15.20.
 
Silver coin demand in the US and Western Europe has leapt in response to the price drop, Reuters reports.
 
Private investors buying small bars and silver coins in the European Union are subject to VAT sales tax of up to 20% – a charge avoided if the silver is vaulted as wholesale bars instead by recognized market professionals.
 
"Sentiment for gold remains negative," says refining and finance group MKS in a note, "and the physical demand out of China that we would typically see following such a large price correction is yet to filter through."
 
Shanghai gold prices fell 1.5% by Wednesday's close, flipping to the largest discount to London quotes to buy gold since April at $2.30 per ounce.
 
"Very heavy selling" in China overnight says one bullion dealing desk, but "We saw very good scale down buying from [other] physical players on this move" it adds, noting that premiums to buy gold over and above London quotes "are starting to pick up in some regions of the Middle East."
 
New data today showed the services sector in China – the world's No.1 gold buying nation in 2013 – slowing again in October and missing analysts forecasts with a 3-month low of 52.9 on HSBC's PMI survey index.
 
Russian central-bank official Ksenia Yudayeva meantime said Moscow could use some of its national foreign currency or even gold bullion reserves – now the world's fifth largest hoard – to pay for buying imports if Western sanctions over Ukraine continue.

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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