Gold News

Gold Bullion Spikes as Stocks Tumble After Mixed US Data, Analysts Cut Price Forecasts

GOLD BULLION prices spiked back to unchanged for the week so far Thursday afternoon in London, as US stockmarkets sank and the Dollar whipped on the currency market following mixed US economic data.
 
Orders for US-made durable goods fell 19% last month, the fastest pace on record, as the end of new aircraft orders reversed July's 22% jump.
 
Claims for jobless benefits, however, came in below analyst forecasts for last week.
 
So too did the Markit PMI index of service-sector activity for September. But completing the third quarter's average level, it still showed record growth for the survey's 5-year series.
 
Gold bullion jumped to touch $1216 per ounce – up 0.8% from an earlier dip to new 2014 lows at $1207 – as the Dollar fell hard against Sterling and the Yen, but held onto overnight gains versus the Euro.
 
Silver prices failed to follow gold higher, dropping after the US data within 2c of Monday's new 4-year low at $17.36.
 
Wall Street's Nasdaq index dropped 1% at the open, and European stocks extended their earlier drop.
 
"Should US equity markets and the Dollar resume their climb," reckons one US brokerage in a note, "we likely will see the selling in gold intensify again.
 
"Moreover, charts continue to look negative across the board."
 
Speaking to Bloomberg News yesterday, "Risks are significantly skewed to the downside," says analyst Jeffrey Currie at US investment bank Goldman Sachs, who urged clients to sell gold just before spring 2013's gold crash began.
 
"Much of the [recent] support was coming from political uncertainty in Ukraine and what was going on in Middle East," says Currie – but that "risk-related source of support has been diminished," agrees a note from US banking conglomerate Citigroup.
 
Gold prices will end 2014 near five-year lows of $1050 reckons Currie, maintaining his previous forecast.
 
Citigroup this week joined Swiss bank UBS and French bank Societe Generale in cutting its forecast gold price.
 
Australia's Macquarie Bank, in contrast, yesterday revised its full-year 2014 average price slightly higher to $1278 per ounce.
 
The London PM Gold Fix – named today as one of 7 "benchmarks" likely to get strict government oversight and criminal charges for attempted manipulation – has so far averaged $1289 year-to-date.
 
"Today sees the start of Rosh Hashana, the Jewish New Year," notes brokerage Marex Spectron's London head, David Govett, "and traditionally this means the markets slow down a bit."
 
Next week brings China's three-session shutdown for the National Day vacation, typically a strong period for consumer gold demand.
 
But major importers UBS "are receiving mixed feedback from traders" according to Swiss refining group MKS, pointing to "favourable arbitrage conditions recently" where strong premiums in Shanghai – over and above global prices – saw inflows rise to "create oversupply onshore."
 
Premiums on Shanghai's most-active domestic gold bullion contract today held at $3.80 per ounce above London prices on turnover equal to $1.6 billion.
 
Shanghai premiums on the city's international free-trade zone kilobar contract – launched last week – rose to $5 per ounce above world bullion prices as trading volume more than tripled to $39 million.

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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