Gold News

Gold Investment Offered "Good Entry Point" as Traders Get "Too Short", ETF Outflows Match Latam & African Mining

GOLD INVESTMENT prices rose to $1260 from an overnight low at $1242 per ounce in London on Wednesday, touching 1-week highs for Euro investors as world stock markets fell and the US Dollar rose.
 
Commodity prices ticked higher with major government bonds. Silver rallied 2.8% to rise again above last week's finish at $19.69.
 
New data meantime showed 188,000 private-sector jobs being added in the US last month. 
 
This week's official Non-Farm Payrolls report, due Friday after the Independence Day holiday, is expected to show US joblessness at 7.5%, a full percentage point higher than the Federal Reserve's stated target for tightening its loose monetary stance.
 
"We've changed our view slightly" on gold investment, says Macquarie Securities analyst Matt Turner in a CNBC interview and now forecasting a rise to $1370 by end-2013.
 
"Markets have been getting ahead of themselves on the end of QE," says Turner. "Gold in particular factored in a lot of this, but our economists don't think it will happen until later in 2014 and 2015."
 
More urgently, investment positioning in Comex gold futures is now "too short – the smallest net long position since 2002."
 
Outflows from exchange-traded gold investment trusts have meantime totaled 600 tonnes already this year, equal says Turner to mining production from Africa and Latin America combined.
 
Gold ETF holdings fell a further 1.4 tonnes Tuesday to 2042.5 tonnes, according to Bloomberg data, "the lowest since May 2010."
 
Gold investment has fallen "because 3 things are up," said Morgan Stanley's chief investment strategist David Darst in a separate interview Tuesday – "interest rates, stock markets, and the US Dollar."
 
The Dollar today spiked to a near-5 week high against the Euro currency, helping the gold price in Euros reach a 1-week high above €971 per ounce – more than 7% above last week's 34-month low.
 
Prices around $1200 per ounce offer a "good entry point" for gold investment, reckons private-bank Coutts' Gary Dugan, chief investment officer for Asia and the Middle East.
 
"At this point [however] it is too early to tell whether we have formed a bottom," says the latest chart analysis from bullion market-maker Scotia Mocatta.
 
"Given the bearishness of the overall technicals, the risk remains for another test to the downside."
 
Sixteen pro-government protesters were meantime reported killed overnight in Cairo, where the Egyptian army's deadline for elected-president Mohammed Morse to open talks with demonstrators is set to expire at 14:30 GMT.
 
Cairo yesterday sold only half a planned auction of new 5-year debt to investors, and at a sharply higher interest of 15.8% per annum.
 
Portuguese bond yields led weaker Eurozone rates higher on Wednesday, breaking 8-month highs above 8% after a minority member of the coalition government stepped down in protest at continued budget cuts.
 
"It sounds the alarm bell of austerity fatigue," reckons Commerzbank strategist David Schnautz in New York. 
 
Officials from Eurozone lenders and the IMF yesterday gave the Greek government 3 days to confirm its budget cuts, or risk losing €2.2 billion needed to repay bonds maturing next month. 
 
Athens stock market fell to new 2013 lows, down 1.9% on the day. Lisbon's main stock index lost 5.5% to its lowest level since November.
 
"After a year and a half of relentless gold selling, earlier this week I turned bullish for the first time in a long while," said trader and publisher Dennis Gartman on CNBC last night.
 
Saying only last week that investment losses in gold would get worse, with gold prices falling to perhaps $900 per ounce, "I'm bullish of gold but I'm not a true believer," Gartman now explains. "I think that the worst is over."
 
Gold investment prices in China – forecast to become the world's No.1 consumer market thanks to India's import restrictions – today held steady, with Shanghai futures trading at a premium of $30 per ounce above international benchmark prices.
 
Premiums in Hong Kong and also Singapore, where Swiss bank UBS has now followed Deutsche Bank in offering Singapore gold storage to clients, also held steady and "elevated", according to Reuters.
 
"Asian buyers believe that gold has probably done enough on the downside for now," the newswire quotes broker Marex Spectron.
 

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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