Gold News

'Safe Haven' Gold Bullion Over $1100 as Stocks Sink, Commodities Glut Worsens

GOLD BULLION rose against all major currencies Wednesday morning in London, trading above $1100 per ounce for the first time in 7 sessions as world stock markets, industrial commodities, corporate bonds and non-US currencies all sank yet again.
 
Tracking New York's late turnaround yesterday, Asian stock markets sank by 3%, with European equities losing the same by lunchtime.
 
Gold priced in British Pounds jumped to a 7-month high as Sterling fell once more despite stronger-than-expected UK jobs data.
 
Gold bullion priced in British Pounds Sterling per ounce
 
Rising alongside what analysts and headline-writers today called "safe haven" gold bullion, 10-year US Treasury bonds pushed the yields offered to new buyers down to 7-month lows beneath 2.0%.
 
In contrast to gold – now rallying over 5% from new 6-year lows at $1046 per ounce hit at the start of December – crude meantime hit new 12-years lows beneath $28 per barrel after the International Energy Agency warned yesterday that the worsening glut could see global oil markets "drown in oversupply".
 
The drop in energy prices risks worsening the supply-glut in industrial metals, warns consultancy Oxford Economics, as it delays the pressure on miners to cut production.
 
"How much longer do you think we're going to see some of this production remain around before it's forced to be taken out of the market?" asset-management giant BlackRock's £2 billion mining fund boss Evy Hambro apparently demanded of commodities giant Glencore (LON:GLEN) on a call last month, according to the Financial Times.
 
GLEN lost another 5.6% on the London Stock Exchange today, extending the stock's loss since floating in 2011 to more than 85%.
 
Silver prices also rose with gold bullion Wednesday, adding 1.5% from last weekend to touch $14.17 and matching the highest Dollar level of the last two weeks.
 
But with the largest exchange-traded gold trust vehicle seeing investor interest unchanged Tuesday, the iShares Silver Trust (NYSEArca:SLV) shrank again, now shedding more than 300 tonnes since this time last month, equivalent to 12% of average monthly world mine output.
 
The giant SPDR Gold Trust in contrast (NYSEArca:GLD) has added 28 tonnes of bullion over the last month to back its growing number of shares in issue – equal to some 10% of average world monthly mine output.
 
Peaking at the end of 2012 with 1,350 tonnes, the GLD has since shrunk by 704 tonnes, equal to an extra 7.5% of the world's record-high gold mining output over the last 3 years.
 
"Gold will likely continue to benefit from safe haven status should equity weakness persist," says an overnight Asian trading note from one bullion desk.
 
"The ability of gold to cut the bulk of [its recent] losses," says a separate note from global investment and London bullion bank HSBC's analyst James Steel, "[plus] the persistence of risk sentiment and comeback in the EUR-USD [exchange rate] leads us to continue to expect further gold gains."

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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