Gold News

Gold Bullion Rallies from $1190 October High as Goldman Channels FDR, Inflation Slides

GOLD BULLION rallied 2.0% from an overnight drop to $1190 per ounce in London on Tuesday, rising back to $1215 as European stock markets lost earlier gains.
 
Commodity markets stalled after Monday's 4.7% bounce on the S&P GSCI index, while the Euro rallied from yesterday's sudden 1-week low to the Dollar.
 
Shanghai's main gold contract closed Tuesday level with London bullion quotes at $1200 per ounce, as Yuan prices retreated another 0.9% .
 
"Fears around China, oil and negative interest rates have likely been overstated in the gold price and other financial markets," says US investment bank – and London bullion market maker – Goldman Sachs.
 
Despite what other analysts call gold's "relentless rally" in 2016 so far, Goldman analysts Jeffrey Currie and Max Layton still target a drop to $1000 within 12 months for gold bullion, telling clients on Monday that they have "nothing to fear but fear itself" – a phrase used in 1933 by Depression-era US president F.D.Roosevelt shortly before he banned the private ownership of bullion, and then raised the official Dollar price of gold, in a bid to boost inflation and curb America's worsening debt-deflation.
 
"It's time to sell the fear barometer," say the Goldman Sachs analysts, urging clients to sell gold short using derivatives contracts, because "Systemic risks [to financial stability] stemming from the collapse in oil and commodity prices are extremely small."
 
Betting on a rise in US inflation expectations was one of five "top trades for 2016" which Goldmans had already advised clients to close at a loss before the end of last week, alongside betting on a rally in the US Dollar, outperformance by US banking stocks, and a rise in Italian bond yields.
 
That left only one "top 2016 trade" still in place, betting on stocks in non-commodity exporting nations against emerging-market banks.
 
Consumer-price inflation in the UK slowed to 0.3% annually last month, new data showed Tuesday.
 
Consensus forecasts for US consumer-price data, due Thursday, expect inflation to show a surge to 1.3% per year from December's annual rate of 0.7%.
 
That would mark the fastest percentage point jump in 1 month since March 2011.
 
 
Technical analysis from French investment bank and London bullion market maker Societe Generale says the gold price was "clearly overstretched" at last week's high of $1263, "suggesting possibility of a near-term retracement towards $1212/1200...likely to be an important support near term."
 
"We would expect [the gold] price to ideally stabilise circa $1200/1192," counters Karen Jones' latest weekly technical chart-book for German financial services group Commerzbank, pointing to gold's October high.
 
"The weekly close above the 2014-2016 downtrend completes a large bullish falling wedge pattern...[with a] key break up point at $1200.
 
"We are currently viewing this sell off as a ‘return to point of break out’," Jones concludes, again targeting $1450 longer term.

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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