Gold News

Gold Prices Struggle 'But Constructive' at $1730 as GLD ETF 'Hemorrhage' Continues

GOLD PRICES struggled against a rising US Dollar in London on Wednesday, trading 0.9% lower for the week so far as new data signalled the first growth in Eurozone business activity for 6 months but global stock markets fell and government bond prices rose, edging long-term interest rates lower from their recent spike.
 
With a reading of 50.0 indicating no change, IHS Markit's composite PMI – derived from surveying business managers across the 19-nation Eurozone – has risen to 52.5 in March according to the first "flash" report, beating analyst forecasts.
 
"But with much of Europe suffering a third wave of coronavirus infections and renewed lockdown measures," says Reuters, "that may not last through April."
 
New US data also defied forecasts but in the other direction, with durable goods orders for February falling 1.1% from the same month last year against growth of 0.8% expected.
 
New York's stock markets opened the day higher, but with spot gold bullion prices trading at $1732 per ounce, the MSCI World Index of developed-economy stock markets fell for the 4th time in 5 sessions to trade 1.7% below last month's new all-time high.
 
New York's most active Comex gold contract meantime showed a small discount to London spot, trading $2 per ounce cheaper on April futures on the 1st anniversary of its historic spike to a $100 premium as the UK first went into lockdown.
 
Chart of US Dollar spot gold price. Source: BullionVault
 
"Last year investors were chasing the price of gold higher as they amassed large volumes," says the new 2021 Gold Yearbook from US analysts CPM Group.
 
"This year they are expected to buy gold but wait for prices to soften on temporary dips before they step in as big buyers."
 
Giant gold-backed ETF investment product the SPDR Gold Trust (GLD) yesterday shrank by another 0.6%, resuming the net outflows seen so far in 2021.
 
Gold ETFs as a group are "still hemorrhaging," says Rhona O'Connell, chief precious metals analyst at brokerage StoneX, "with 27 consecutive days of redemption.
 
"Losses in Dollar terms March to date are $5.7bn."
 
But price-wise "Gold holds ground at $1730," says the precious metals team at French bank and London bullion market maker BNP Paribas.
 
"It's a constructive pattern being built here...likely to keep us in a range of $1700-$1760 absent more macro developments.
 
"The downside seems supported by physical markets in Asia."
 
Gold prices in Shanghai today rose to a $10 premium over London quotes, extending the run of solid incentives for new imports – out of the metal's key storage and trading hub, and into the No.1 consumer market – even while the Chinese Yuan weakened towards 3-week lows against the US Dollar on the currency market.
 
Gold in Euro terms today held unchanged for the week so far around €1495 while the UK gold price in Pounds per ounce rose £5 from Friday's finish to trade near 1-month highs above £1262.
 
Energy prices meantime rallied from the last fortnight's steep fall as a grounded container ship in the Suez Canal spurred talk of supply problems, helping Brent crude prices to rise for only the 3rd day in the last 10 sessions.
 
That cut the plunge from early March's 14-month high of $71 to less than $10 per barrel.
 
"We might see some upward pressure on [consumer] prices" as the global economy re-opens, said US central-bank chief Jerome Powell to lawmakers on Tuesday, "[but] our best view is that the effect on inflation will be neither particularly large nor persistent."
 
"While asset valuations are elevated by historical metrics," added new US Treasury Secretary (and former Fed chair) Janet Yellen, also testifying to the House Committee on Financial Services – and warning that taxes will have to rise to help fund President Biden's $1.9 trillion Covid recovery plan – "there's also belief that with vaccinations proceeding at a rapid pace, the economy will be able to get back on track."
 
Benchmark US Treasury yields today rallied 2 basis points on 10-year debt to 1.65% per annum as New York opened for business, around 1/10th of a percentage point below Friday's new 14-month high.
 
Ten-year German Bund yields had earlier fallen back to minus 0.35% as UK Gilt yields retreated to 0.76%, also down 15 basis points from February's 11-month highs.
 
Silver prices meantime lagged gold for the week, trading near the lowest since 9 March at just above $25 per ounce.

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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