Gold News

Gold Investment 'Bullish' But Asian Demand Poor as Dollar Up, US Fed 'Should Hike'

GOLD INVESTMENT prices held in a $10 range Friday morning in London, trading at $1271 per ounce as the New York opening approached and European stock markets erased earlier losses once again.
 
Heading for a 1.3% week on week drop against the Dollar, gold bullion fared better against all other major currencies except the Swiss Franc.
 
Losing 0.8% from last Friday's finish against the Euro, investment gold in wholesale bars traded unchanged vs. the Australian Dollar, and rose slightly vs. the Japanese Yen.
 
Japanese shares, however, rose 1.9% for the week on the Nikkei index.
 
New York's S&P index headed for a slight weekly drop, trading flat from the end of 2015.
 
Gold bullion, in contrast, has gained 20% versus the US Dollar so far in 2016.
 
Chart of the S&P500 vs Dollar gold prices, daily since 2006
 
"The market remains too pessimistic about the fundamental strength of the US economy," said Federal Reserve voting member Eric Rosengren in a speech overnight.
 
"[Should] the economic data confirm these trends," he went on, "it will be appropriate to continue the gradual normalization of monetary policy" following the US central bank's first hike to 0.0% interest rates in 7 years last December.
 
"If market thinking moves closer to Mr.Rosengen's scenario," says a note from global retail, investment and London bullion bank HSBC, "gold prices may weaken."
 
"I'm not a gold bug. I don't think the world is coming to an end. But I do think inflation is beginning to pick up," said US trader and newsletter publisher Dennis Gartman to CNBC, "turning fundamentally bullish" on gold in Dollar terms.
 
"It's time to sell the dollar like it's going out of style," says US finance website MarketWatch.
 
Looking at yesterday's new Q1 gold market trends report from the mining industry-backed World Gold Council, "We hardly expect to see a repeat of [Jan-March's] strong investment demand," says a note from German financial group Commerzbank.
 
Exchange-traded trust funds worldwide needed 23% more gold to back the value of their ETF shares at the end of March than at New Year 2016, the fastest quarterly addition since the global financial crisis of Q1 2009.
 
"[Now] jewellery demand, which is generally regarded as more stable, should pick up again," says Commerzbank, "meaning that the gold price should be well-supported in the medium term."
 
Gold jewelry demand from top two consumer nations China and India collapsed by more than 27% in Q1 from the same period last year, the World Gold Council's data said Thursday.
 
"As a Chinese tradition, gold jewelry sets are used for weddings," the China Daily today quotes World Gold Council manager Wang Lixin, "but for younger generations, I'm not sure whether they would like to keep that tradition.
 
"They prefer jewelry that can represent themselves, something customized and personalized" which typically means lower caratage than the 0.999 fine Chuk Kam standard.
 
While India's monsoon rains are now forecast to reach all parts of the sub-continent by July, the recent drought, plus two consecutive years of poor monsoon rains, are estimated to have cost the economy INR 650,000 crore (US$97 billion) according to a new study from Assocham (Association of Chambers of Commerce).
 
"The lack of strong physical demand in Asia right now," wrote Japanese conglomerate Mitsubishi's strategist Jonathan Butler this week, "[plus] perhaps overly bullish investor positioning, puts gold in danger of a short term correction or at least a period of consolidation."

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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