Gold News

Gold Ends 2014 Matching Dollar Surge at $1200, Gains 13% for Euro & Japan Investors as Crude Oil Halves, QE Taper Sees Bond Yields Fall

GOLD ended 2014 dead-flat in Dollar terms on Wednesday, closing just shy of $1200 per ounce but gaining almost 6% in Sterling and rising 13% for Eurozone and Japanese investors across the year.
 
Silver prices dropped 18% in Dollar terms, and also fell against all other major currencies.
 
Crude oil meantime sank 2.8% on New Year's Eve, very nearly halving the price of Europe's Brent benchmark from the start of 2014 to hit new 5-year lows at $56 per barrel.
 
In Dollar terms, Japan's Nikkei stock market index showed a 6% loss for 2014, despite rising 7% against the Yen amidst new record levels of quantitative easing from the central bank in Tokyo.
 
With the US Dollar hitting fresh 5-year highs on its trade-weighted index against other currencies, US stock-market futures also pointed higher on New Year's Eve, with total returns from the S&P 500 index set to end 2014 above 14.5%.
 
US Treasury bonds rose in price as well on Wednesday, extending the total 2014 return on Washington's 10-year debt to more than 10% for the year.
 
As bond prices rose today, pushing German and other major Eurozone yields near new all-time record lows, 10-year US Treasury yields fell to 2.16% per annum, more than 85 basis points lower from the start of 2014.
 
That was before US central bank the Federal Reserve began "tapering" its monthly quantitative easing bond-buying program from $85 billion of new money creation in January to zero in November.
 
Recording 2014's last London Fix – the global benchmark for physical gold – at $1199.25 per ounce, gold bullion shed 0.2% for Dollar investors from the AM Fix of last New Year's Eve.
 
2013 was gold's worst year in three decades, bringing a loss of 28% in Dollar terms on heavy selling by Western investment funds and shareholders in exchange-traded trusts (ETFs).
 
The world's largest gold ETF, the SPDR Gold Trust (NYSEArca:GLD), shrank another 2 tonnes on Tuesday this week, taking 2014's outflow to 87 tonnes.
 
Down some 11% by weight, the GLD has now reached the smallest size since 22 September 2008, one week after the collapse of Lehman Brothers.
 
2013 saw the GLD shed 552 tonnes of gold, a drop of 41% from its record highs of end-2012.
 
Silver's largest ETF, the iShares Silver Trust (NYSEArca:SLV), also sold metal this Tuesday, hitting a new 3-month low at 10,250 tonnes, down 6% from start-October's 3.5-year high.
 
Over in silver derivatives, meantime, latest data from US regulator the CFTC showed the total number of Comex futures and options shrinking last week to the lowest level since May.
 
Large speculators such as hedge funds have in 2014 taken their bullish betting on silver futures and options – net of that group's bearish bets – both to four-year highs but also 11-year lows, twice recording a "spec net short" for the first time since 2003.
 
Over in Comex gold futures and options, large speculators doubled their net betting on higher gold prices across 2014.
 
"Geopolitical tensions could bring gold back up," Bloomberg quotes Donald Selkin, chief strategist at $3 billion money manager National Securities Corp. in New York.
 
"Central banks will probably start buying, and prices are getting close to production costs. China could loosen its monetary policies to boost the economy."
 
Solid gold trading in Shanghai today saw the main domestic contract close 2014 equal to a $13 per ounce premium over London quotes, around 5 times the recent average and suggesting strong wholesale demand for bullion imports ahead of the Chinese New Year of the goat.
 
Marking the strongest single period for private Chinese gold demand, New Year falls on 19 February in 2015.

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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