Gold News

Gold Investing 'Lacks 5 Key Drivers', Seen Sub-$1000 Post-Fed Hike as Bank of England Delays, US Jobs Data Awaited

GOLD INVESTING prices stayed tight inside a $10 range in London on Thursday, rising to $1090 per ounce as New York stock markets opened sharply lower and European equities held flat ahead of tomorrow's much-anticipated US jobs data for July.
 
US crude oil contracts fell 1.5%, dropping near 6-year low at $44 per barrel.
 
Major government bond prices rose, pushing 10-year UK Gilt yields down to 1.93%, some 4 basis points below yesterday's 2-week high, after the Bank of England voted 8-1 to leave its key interest rates unchanged for the 77th month running.
 
"It is more likely than not that gold prices will drop below $1000 in the period after the Fed announces its first interest rate hike," says a note from French investment and bullion bank Natixis, expecting the US central bank to raise rates from 0% in September.
 
"It is hard to see support for prices [now that] the five forces behind the rise in gold prices," Natixis says, pointing to Western ETF investing, net demand from central banks, weak Indian buying, the end of US quantitative easing, and now the weakening of demand in China – "the buyer of last resort" when prices crashed in 2013.
 
But "with so much [bullish] length already eliminated," says market maker Mitsui Global Precious Metals, looking at speculative positioning in US Comex derivatives contracts, "it will probably take fresh shorts to force gold lower again from here.
 
"On the other hand the support on dips towards $1080 appears to have come largely from profit-taking and from passive-type [or] institutional buyers – not the sort to chase it higher."
 
Investing through the giant SPDR Gold Trust (NYSEArca:GLD) shrank again Wednesday, cutting the amount of bullion needed to back the fund's shares another 3 tonnes to a fresh 7-year low of 668 tonnes, down 43 since the end of Q2.
 
"All eyes are on the non-farm payrolls released on Friday," says the trading desk at Swiss refinery and finance group MKS, noting that gold "was heavily offered and just as quickly trad[ed] back down" from $1090 on Wednesday when the private-sector estimate from ADP Payrolls showed US jobs hiring "softer than expected."
 
"Gold remains glued to the lower end of our multi-year range at current $1086," says Canada-based bullion bank Scotia Mocatta.
 
"Gold has stabilised," says technical analysis from  French investment bank and bullion market maker Societe Generale, "above the earlier highlighted pivotal support of $1080," defined by a long-term channel on gold's 45-year chart and also the 50% retracement gold's bull market from 1999-2011.
 
"However, any rebound should be of corrective nature and short-lived," it adds, pointing to resistance at $1093 from "the down sloping channel since mid-June and the upper limit of the past week's range."

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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