Gold News

Gold Bullion Slips But "Supported by Weak Data" as UBS Hikes Silver Forecast on "Lure of Volatility"

GOLD BULLION prices in London bounced $5 per ounce from a new low for the week of $1309 lunchtime Thursday, only to ease back as the US Dollar rallied following weak US jobs and stronger-than-expected inflation data.
 
Gold bullion premiums in China, the world's No.1 gold consumer nation, had earlier slipped to new 3-month lows at $2.50 per ounce.
 
China's manufacturing activity today showed its worst monthly contraction since July on the HSBC PMI survey.
 
Both manufacturing and services in the 17-nation Eurozone continued to expand, but undershot analyst forecasts.
 
Price to buy gold bullion with Euros rallied to Tuesday and Wednesday's highs at €960 as the single currency fell along with world stock markets.
 
Continuing US jobless claims were then shown rising 1.3% last week, outpacing consensus forecasts by 11,000.
 
Consumer price inflation meantime slowed to 1.6% year-on-year in January. But the absolute price level on the official CPI index rose to a new all-time high.
 
"It is hard to make a case for substantially lower gold prices given the backdrop of rapidly slowing growth in a number of countries," says one US brokerage.
 
"In addition, continued turmoil in emerging markets should provide...an additional element of support and likely keep the current downside correction somewhat limited in scope."
 
Gold bullion prices face "a large obstacle", says a new note from Swiss investment bank UBS, for as long as the US maintains 3% growth, the Federal  continues to taper its QE money printing, and Dollar interest-rate hikes remain likely for mid-2015.
 
But meantime, bullion "has started to shed its stigma, if slowly," says the bank's strategist Edel Tully, raising UBS's 3-month gold price forecast from $1100 to $1350.
 
"The improvement in gold sentiment should have a considerable positive spillover effect on silver," her note adds, with silver's "lure" of volatility enhanced by the chance for a short-covering rally, driven by bearish traders forced to close their positions by rising prices.
 
Because UBS sees further economic recovery ahead, "We continue to expect [industrial] silver to outperform gold," the note goes on, with silver prices now forecast to rise to $23 in 3 months' time, up from the previously bearish call of $16 per ounce.

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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