Gold News

Gold Bullion Slumps Near 3-Month Low in Dollars, Holds 3.5% Below 2014 Euro High, as Markets Await ECB's Anti-Deflation Move

GOLD BULLION traded in London fell to 11-week lows beneath $1270 per ounce Tuesday morning, losing $20 per ounce for the week so far as the US Dollar rose sharply and world stock markets also gained.
 
Ahead of Wall Street's return from the Labor Day weekend, gold bullion stood 1.4% below last Friday's finish in Dollar terms.
 
The US currency meantime hit a new 12-month high against the Euro, widely expected to see some form of quantitative easing "money printing" in Thursday's European Central Bank decision.
 
Euro prices for gold bullion fell Tuesday to 1-week lows near €965 per ounce, some 3.5% below their 2014 high to date.
 
The Dollar also hit a 7-month high against the Japanese Yen, and a 1-week high against the Chinese Yuan.
 
Shanghai's most active gold bullion contract fell 0.8% towards 3-month lows in the Yuan.
 
In Dollar terms, prices on the Shanghai Gold Exchange cut their premium to London quotes from last week's $2 per ounce to just 60¢ at Tuesday's close.
 
"This week central bank meetings will be a key focus," says a trading note from MKS, the silver and gold bullion refining group, in Geneva.
 
"Expectations are mixed ranging from the ECB doing nothing through to...'pre- announc[ing]' purchases of asset-backed securities.
 
"[Friday's] non-farm US payroll data should apply more pressure to gold and silver prices."
 
Silver prices today matched London's sharp drop in gold bullion, losing 1.5% to hit the lowest level since mid-June at $19.18 per ounce.
 
Monday's weak PMI reading of Eurozone manufacturing activity was followed this morning by confirmation that Eurozone factory-gate prices fell 1.1% in July from the same month last year.
 
Trying to avoid consumer-price deflation by devaluing the Euro, "The best thing the ECB could do right now is to buy US Treasuries in large size and on a non-sterilised basis," says Standard Bank FX strategist Steven Barrow in his daily note.
 
"The ECB might not be popular for joining the 'currency war' but...others should appreciate it's better to have a healthier Eurozone economy, with higher inflation, than the sort of mess we have at the moment."
 
Priced in the Euro, gold bullion has now dropped 30% after returning to September 2011's record peak of €1375 per ounce a year later.
 
ECB president Mario Draghi then vowed to "do whatever it takes" to preserve the currency union, unveiling a series of bank lending and bond-buying programs likely to be widened and extended at Thursday's meeting.
 
"I don't think the ECB has the instruments to tackle deflation to be frank," Bloomberg News last week quoted German finance minister Wolfgang Schauble.
 
"Monetary policy can only buy time. [The ECB] has come to the end of its instruments."

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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