Gold News

Gold Bullion Hits 1-Month High in Euros But Risks 'Collapse' in Dollars as ECB's Draghi 'Extremely Foolish' on QE vs. Inflation Says BoE's Carney

GOLD BULLION fell closer to November's 5-year lows vs. the US Dollar in London trade Wednesday, but rose against the Euro as the single currency sank once again on the FX market.
 
Dealers saw stronger wholesale Asian demand for gold bullion as the Dollar price dropped to $1152 per ounce – down 1.3% for the week so far.
 
Trading down to new 12-year lows against the greenback, the Euro in contrast saw gold touch a 1-month high of €1197 per ounce, some 1.8% above last Friday's finish.
 
"Market collapse targets the $1131 recent low [from early November]," says the latest weekly technical analysis from Karen Jones at Germany's Commerzbank, "then $1093/1097."
 
"Signals hint to continued weakness," says London bullion market-maker Scotia  Mocatta's technical analysis, "given the acceleration in momentum indicators."
 
World stock markets meantime reversed some of yesterday's sharp losses, but commodities fell again.
 
Greek bond yields held above 10% on 10-year bonds, but other 'weak' Eurozone yields such as Italy's hit fresh all-time lows, apparently driven by €10 billion of European Central Bank QE.
 
Germany's 30-year borrowing costs on the bond market today fell below the United States' 2-year yield as Bund prices rose.
 
UK central bank chief Mark Carney yesterday told lawmakers that it would be "extremely foolish" to try and raise the rate of inflation using QE.
 
Eurozone monetary chief Mario Draghi today called the ECB's new QE program "a valid and effective tool to bring inflation closer to our policy goal."
 
"Seeing continued but light-scale gold buying," says one London bullion bank in a note, "certainly not enough to prevent break lower."
 
"Physical buyers are responding to lower prices with fresh interest," agrees Mitsui Precious Metals' Hong Kong desk. "However, momentum favours the downside in the short term."
 
"There is physical demand down here," agrees the London office of brokerage Marex Spectron, "but not enough to move us back up.
 
"The more likely scenario is further moves to the downside."
 
"The Dollar rally," adds US brokerage INTL FCStone, "still seems to be too strong to reverse course anytime soon."
 
Gold trading in Shanghai edged back overnight, with China's main domestic contract slipping to a premium of $3.75 per ounce above comparable London bullion quotes.
 
New data meantime showed industrial production in the world's second-largest economy shrinking in February, as urban investment and retail sales also missed analyst forecasts.
 
"Not surprisingly," says FX strategist Steven Barrow at Standard Bank, "the data has spurred speculation that the People's Bank will have to ease policy again."

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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