Gold News

Gold Bullion Market 'Thin, Nervous' Ahead of the Fed as Weak US GDP Knocks the Dollar

GOLD BULLION rallied from an overnight dip in Dollar terms Wednesday, but slipped further for UK and Euro investors as the US currency fell near 2-month lows on the FX market following weaker-than-expected GDP data.
 
The US economy grew only 0.2% annualized during the first 3 months of 2015, the first estimate said, well below Wall Street's 1.0% consensus.
 
"The focus will quickly shift to Q2 data," reckon analysts at French bank BNP Paribas, pointing to manufacturing figures Friday and then US payrolls data next week.
 
Meantime in gold bullion, and after Tuesday's fresh jump to 3-week highs at $1215, "Expect a thin, nervous market," says David Govett at brokers Marex Spectron in London, "with everyone Dollar watching" ahead of Wednesday's later release of the US Federal Reserve's policy statement.
 
The last statement before the much-anticipated June meeting, when several Fed members have said they expect to raise interest rates from zero for the first time in 6.5 years, today's release is not followed by a press conference or accompanied by new Fed economic forecasts.
 
"Gold [has seen] quite a reversal higher," wrote German bank Commerzbank's technical analyst Karen Jones in a weekly report Tuesday, calling this week's move "unexpected.
 
"It has severed the 2015 downtrend, causing us to neutralise our [formerly bearish] view." 
 
But having turned bearish on this month's earlier drop, "We remain bearish" says bullion bank Scotia Mocatta's daily chart analysis "in the absence of a close above 1220, and continue to expect further weakness below 1180."
 
"Physical demand up here is once again subdued," adds Govett at Marex Spectron. "Unless the [Fed] news is very Dollar bearish, we may be nearing the top of the range."
 
Tuesday's rise in Dollar spot gold "drew out some initial sellers on the Shanghai exchange" overnight, says Swiss refining and finance group MKS in a note on Asian trading.
 
That capped the premium on wholesale gold in China – over and above comparable London quotes – below $1.50 per ounce, with only "light demand emerging" as prices slipped to $1210 in Asian trade.
 
So far in 2015, says Philip Klapwijk, formerly of the GFMS consultancy and now independent in Hong Kong, "The strengthening US dollar and booming global stock markets have dampened market sentiment."
 
The Maersk cargo ship seized Tuesday by Iran was meantime  said to be subject to a court order over debts still owing from a decade ago, according to Iranian news agency Tasnim.
 
Today's falling Dollar and flatter price saw gold bullion for Euro investors erase two-thirds of the week's previous 2.1% jump.

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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