Gold News

Gold Investment Shrinks as Price Adds 1.3% for Week, US GDP Cut, 'Inflation Low, Rates Up' Reckons FT

GOLD INVESTMENT prices slipped back below $1200 per ounce Friday as the Dollar rallied despite a cut to 2014's US economic official growth estimate.
 
That cut gold's weekly gain to 1.3% for US investors, while Euro prices held 0.9% above last Friday's finish.
 
Silver also slipped, matching gold's week-on-week rise just shy of $17 per ounce, as US crude oil slipped back below $50 per barrel.
 
Eurozone and US stock markets meantime recovered a little of the week's sharp losses as the Bureau of Economic Analysis confirmed its estimate of GDP growth for 2014 at 2.2%, down from the initial estimate of 2.6%.
 
The Dollar steadied on the FX market but headed for a second weekly drop on its broad trade-weighted index.
 
Rising 13% since this time last year against a basket of the world's other currencies, the Dollar hasn't fallen for 3 weeks running since July.
 
"If the Dollar does keep its uptrend," says Erik Norland, senior economist at derivates exchange the CME Group, "it will likely put pressure on gold prices in USD terms but not necessarily from the perspective of buyers using other currencies."
 
Against the 1% rise in Dollar terms since New Year, investment gold today held 12% higher against the Euro.
 
Silver priced in Euros has risen 21% so far in 2015, matching the gain in Germany's Dax index of Frankfurt-listed companies.
 
Viewed in the Dollar however, "Both metals are not only trading far below their [2011] peaks," says the CME's Norland, "but also far below their inflation-adjusted highs set in 1980.
 
"This gives a sense of the scale of their downside and upside potential."
 
Back in Friday's action, "Euro gold very firm above €1100," says the trading desk at Standard Bank in London, pointing to "the Greek payment deadlines drawing closer with no real resolution in site."
 
Athens today sent a revised list of reform proposals to its Eurozone and IMF bail-out lenders – the third such list in a month.
 
The Greek government also denied a report in German tabloid Bild that finance minister Yanis Varoufakis is about to resign.
 
"The yellow metal, like the [Japanese] Yen, clearly retains 'haven' cachet," says an op-ed in the Financial Times, linking gold's rally through $1200 on Thursday to investment capital seeking shelter on news of the Saudi air-strikes in Yemen.
 
"Geopolitical tensions decay after the first jolt," the FT says. "Inflation really is of little concern for now. Rates are going up, surely."
 
Gold and silver ETF investors in fact cut their holdings this week, with the quantity of gold bullion needed to back shares in the giant SPDR Gold Trust (NYSEArca:GLD) falling another 6 tonnes Thursday as prices broke above $1200, and retreating to what was a fresh 6-year low in early January at 737 tonnes.
 
Coming through share cancellations as investor demand for the GLD product declined, yesterday's drop took the fall in the exchange-traded trust's gold backing to almost 5% from early-February's 5-month high.
 
Stock cancellations in the iShares Silver Trust (NYSEArca:SLV) meant the quantity of bullion needed to back its shares fell a further 44 tonnes, extending the drop from early March's 2-month high to almost 1% at 10,074 tonnes.

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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