Gold News

Gold Bullion Drops as Dollar, T-Bond Yields Fall Even as US Fed Seen Cutting 'Patient' from Weds' Rate Policy Statement

GOLD BULLION dropped against all currencies in London trade Monday, edging down ahead of Wednesday's much-anticipated policy statement from the US Federal Reserve, expected to signal less "patience" with holding rates at 0% for much longer.
 
London's PM Gold Fix came in at $1150.75 per ounce – its lowest Dollar price for physical bullion settled in the world's central trading hub since early November's 5-year lows.
 
Priced in Euros, wholesale gold bullion fell 1.4% as the single currency rallied from 12-year lows against the Dollar.
 
Despite a growing consensus the Fed will signal a June rate rise in Wednesday's statement, US Treasury bond yields also slipped as the Dollar fell on the FX market, trimming 10-year rates to 2.08%.
 
That's almost one whole percentage lower from the start of 2014, when the US central bank began 'tapering' its QE asset purchases from $80 billion per month to zero by last November.
 
Shanghai's stock market meantime closed Monday more than 2% higher after China's premier, Li Keqiang, closed the 2015 People's National Congress by saying Beijing has " plenty of policy tools" for supporting GDP growth in the world's second-largest economy.
 
Trading in Shanghai's main "international' gold contract, launched last autumn, leapt to a new record high, beating its 6-month lifetime average more than 9-fold as prices held firm in Yuan terms from Friday's finish.
 
"Focus will be squarely on the [US Fed] this week," says a note from Swiss gold bullion refining and finance group MKS, with pundits and commentators widely discussing the possible removal of "patient" from the central bank's statement on finally raising rates from 0% after six years.
 
Losing the word "patient [w]ould have a downward emphasis for gold," says MKS, "while no change to this language will likely see gold snap higher quite sharply.
 
"Either way we think there will be fire works around this announcement."
 
"Officials are telegraphing that they'll drop the word 'patient'," reports MarketWatch, citing 'noted Fed watcher' Jon Hilsenrath at the Wall Street Journal.
 
Faced with "improving labour market conditions and expectations of higher interest rates from the Fed," says a note from Standard Bank's London commodities team, US Comex futures and options have seen "speculators exit gold in recent weeks."
 
Latest positioning data from US regulator the CFTC show speculative betting on gold, net of bearish bets, shrinking last week to what was a 4-year low when reached in March 2013, one month before the sharpest crash in gold prices for a generation.
 
The world's largest gold-backed ETF, the SPDR Gold Trust (NYSEArca:GLD), meantime saw the amount of bullion needed to back its shares drop by 5.6 tonnes last week, down to 750 tonnes.
 
Reflecting net liquidation by GLD stockholders, that took the drop from February's 5-month high in the size of trust-fund gold holdings to 3%, now at what was a 6-year low when first reached last autumn.

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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