Gold News

Gold Bars Halve Last Week's $100 Drop as Dollar Retreats

GOLD BULLION BARS traded in London's wholesale market held above $1840 per ounce on Friday, halving last week's $100 drop towards 4-month lows for US investors as global stock markets also rose and the Dollar fell from 2-decade highs on the currency market.
Priced in other currencies, London-settled Good Delivery gold bars regained 1.7% from Wednesday's 8-week low in Euro terms and 2.0% from Wednesday's 7-week low in Sterling.
Trading at €1744 and £1478 respectively, that took the cost of buying gold bars back up to last Friday's level for Euro and UK investors.
"Gold's correlation with the Dollar is not always negative," says a market update from the mining industry's World Gold Council, "[but] rising interest rates can make gold less attractive if they raise the opportunity cost [of owning bullion bars] or reflect higher economic growth ahead. 
"Neither of those appear to be true at present. Growth expectations are falling and the opportunity cost – correctly viewed in real terms – remains historically low" after inflation.
Chart of 10-year US Treasury yields (blue) vs. CPI annual inflation. Source: St.Louis Fed
With inflation running at 4-decade highs in the US, Germany and UK on the latest data, Friday saw the annual yields offered to buyers of US, German or UK government bonds edge higher but hold below the late-2018 levels hit earlier this month by US Treasury debt and 2015 levels for Bunds and Gilts.
"Recession fears amid market turmoil," says a headline at The Times in London.
"Goldman, J.P.Morgan strategists see recession fears as overblown," says a headline on Bloomberg reporting US investment-bank forecasts.
European equities rallied Friday to erase this week's earlier losses on the EuroStoxx 600 index, trading 4.1% above early May's 2-month low.
"Gold, in a downtrend since mid-April, has found a tentative bid amid continued turbulence across global stock markets," reckons a note from spreadbetting platform Saxo Bank.
For gold bullion bars, "A countermovement was overdue following a pronounced phase of weakness close to oversold territory," says German financial services group Commerzbank.
"The fact that the US Dollar has been noticeably weaker [means] the upswing is continuing."
Yesterday's fall from 2-decade highs for the US Dollar saw a rebound in gold prices attract inflows to giant gold-backed ETF investment fund the SPDR Gold Trust (NYSEArca: GLD) for the first day in a month, needing 0.7% more shares in issue to meet demand and reversing this week's earlier investor outflows.
Competitor ETF the iShares Gold Trust (NYSEArca: IAU) in contrast – also backed by the value of a large gold bar holding – held on track for its 3rd week of investor liquidation, shrinking by 0.3% from last Friday.
The price of gold kilobars landed in China – the precious metal's No.1 household consumer market – meantime finished today at a premium of $1.25 per ounce against large bars traded in London, more than halving the incentive for new imports compared to last week and offering barely 1/6th the last 5 years' historic average.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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