Gold News

Gold Bullion Rises After US Jobs Data, "Finding Major Support" Near $1100 from Asian Demand, Low Scrap & Falling Miner Capex

GOLD BULLION prices rallied Friday lunchtime in London, cutting the week's earlier 3.3% drop to new 4.5-year lows in half after weaker than expected US jobs data.
 
Non-farm payrolls expanded by 214,000 in October, the Department of Labor said, missing analyst forecasts for only the fourth time this year and taking the official jobless rate down to 6-year lows at 5.8%.
 
The US Dollar retreated from new 2-year highs versus the Euro, and Wall Street equities followed Eurozone stock markets lower.
 
Gold prices had earlier dropped in late Asian trade to $1132 per ounce – some $40 below last week's finish – but "the selloff overnight found good volume buying as Europe started trading," according to one dealing desk.
 
"A break through Thursday's Asian low was the catalyst" for that drop, says another, but "sentiment was reversed as London opened...with participants positioning themselves ahead of the NFP print."
 
"The prevailing winds continue to harass gold," says another Asian dealer however, pointing to some US Federal Reserve members "impatience with raising US rates" and noting that last Friday the Dollar Index "closed at significant monthly trend line resistance extending back to February 1985.
 
This week "DXY pulled above that trend line," it adds.
 
For gold bullion in Dollar terms, "There is a floor around $1100 set by Chinese retail demand," reckons Standard Chartered head of commodities research Paul Horsnell, quoted by Bloomberg.
 
"Physical demand indicators out of China and India are firming."
 
Shanghai gold prices today held around $1 per ounce above comparable London quotes after trading at a discount – and suggesting weak demand from the world's No.1 consumer nation – earlier in the week.
 
"We would expect to see further strong demand around $1100," agrees French investment bank Natixis, also asking "What price level might encourage purchases by China's [government reserves manager] SAFE?"
 
Other "major factors to offer growing support" Natixis adds are gold mining producers are reducing capital expenditure, "slashing capex [so] output growth is likely slow before slipping into reverse."
 
Also on the supply side, current gold bullion prices mean "lower supply of scrap gold."
 
Here in London meantime Friday, trade body the London Bullion Market Association announced that US-listed platform and data providers Intercontinental Exchange won the role of adminstering the daily London gold price, used as the key benchmark price worldwide.
 
Eleven organizations stand ready, the LBMA said, to participate in the launch of the 100-year old Gold Fix's continuation by electronic platform and computer algorithm sometime in early 2015.

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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