Gold News

Gold Bars Shed from GLD as Euro QE and Poor US Jobs Data Fail to Spur Price

GOLD BARS traded in London's wholesale market spiked and then fell in price Friday, holding unchanged on the day at $1266 per ounce after much weaker-than-expected US jobs data.
 
Failing to beat analyst forecasts for the first time since January, last month showed net payroll additions of 142,000 workers – well below consensus expectations of 225,000.
 
Silver extended gold's 1.7% drop for the week to 2.1% at $19.07 per ounce.
 
Earlier there had been "another move higher" in the yield offered by 5-year US inflation-linked bonds, notes Walter de Wet at Standard Bank's bullion dealing commodities team.
 
With TIPs yields acting as "a proxy for US real rates," de Wet said, "Higher real yields = lower gold (and struggling precious metals)."
 
But US yields fell as conventional bond prices rose fast aftet the Non-Farm Payroll data, knocking 3 basis points off 10-year Treasury returns to 2.41%.
 
The US Dollar meantime edged back from multi-month highs on the currency market, pulling wholesale gold bar prices for Euro and Sterling traders lower after Thursday's sharp recovery to unchanged on the week.
 
European stock markets also retreated, reversing yesterday's gains when the Eurozone central bank cut its key interest rates and announced a QE asset purchase program to try to avoid deflation in the 18-state currency union.
 
"ECB balance sheet expansion, extended period of low interest rates and concern over a slower-than-expected economic recovery helps gold," says a note from Swiss bank and London bullion market-maker UBS, "but only to a point."
 
Pointing to this summer's stronger Dollar, "At best, current ECB easing offsets some of the downside from Fed policy normalisation" as the US central bank winds down its monthly QE asset purchase scheme.
 
"In our opinion it would take more aggressive action from the ECB...likely to come alongside a sharp deterioration in Eurozone growth...for gold to benefit significantly."
 
Thursday's flat-lined Dollar gold price saw investors shed holdings in the giant SPDR Gold Trust (NYSEArca:GLD)  – the world's largest exchange-traded fund by value at its peak three years ago today.
 
The quantity of gold bars held to back shares in the trust fell by almost 5 tonnes – the "biggest one day drop since mid-July" according to Reuters – to slip below 786 tonnes, a 5-year low when first reached last winter.

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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