Gold News

Gold Investing "Negative" as Crude Oil Slumps, "Ice Age Thesis" Gains Appeal

GOLD INVESTING bids pushed prices up to $1222 per ounce in quiet Asian trade Thursday morning, but the metal retreated as European stock markets fell again and crude oil sank 2% to multi-year lows.
 
Silver followed gold's pop and fall, slipping for the second time this week below $17 per ounce – a level last seen in March 2010.
 
Put options – bets that prices will fall – "remain in strong demand for silver much more than gold," says one bullion bank's trading desk.
 
"Investors have become negative on precious metals as a whole," says Dutch bank ABN Amro.
 
"With outstanding positions [in future and options] still being net-long, liquidation of investing positions has still further to go resulting in more price weakness."
 
"It is too soon to discount further gold ETF liquidation," says another bank's commodities team, remarking on 2014's continued but slower pace of investment selling through exchange-traded trust funds compared with 2013.
 
Over on the currency market, the Euro steadied above this week's new 2-year lows after the European Central Bank failed to back any new stimulus measures at its monthly meeting.
 
"We [did] decide," said ECB president Mario Draghi in his monthly press conference, "on the key operational details" of the bond-purchase schemes announced in September, stressing again their "sizeable impact" the central bank's balance sheet – currently one third smaller from its 2012 peak.
 
Wholesalers in India – the world's No.1 gold buying nation until 2013 – meantime reported a rise in imports ahead of next month's Diwali festival.
 
But "the absense of [Chinese] demand" thanks to the Golden Week holidays, says Swiss refining group MKS – plus "strong expected [US jobs data Friday] and general bear bias" – means gold prices "could be testing $1180-1200 in the coming days.
 
"Another factor" are the continued pro-democracy protests in Hong Kong, MKS adds, "which could dramatically" dent that "prominent source of physical demand."
 
With Opec meeting next month, notes French investment bank Natixis, the cartel of oil-producing nations "faces an oversupplied market [and] must now also face up to the prospect of rising US exports of crude" from shale output.
 
World No.6 oil producer Nigeria made zero imports to US last month for the first time in 40 years.
 
But slower economic growth is also a key factor, says the Financial Times, with oil analysts cutting 2014 forecasts for additional world demand in half.
 
"I've had a lot of requests of late to resend our Ice Age [investing] thesis," says French bank Societe Generale strategist Albert Edwards, reprising his long-term call for Japan-style deflation worldwide, pushing equity markets into a major and protracted bear market.
 
"This is usually a good indication that we have again reached that point in the cycle where investors are willing to start valuing risk properly again."
 
Silver investing through exchange-traded trust funds rose sharply throughout the third quarter, notes Australia's Macquarie Bank, giving "continuing evidence of the remarkable confidence of investors in that metal despite its poor price performance."

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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