Gold News

Gold Investment Rallies in Largest ETF, Re-Opened in India, as US Jobs Data Pushes Fed Tapering "Back to March"

GOLD INVESTMENT prices slipped 1.1% from yesterday's sudden 3-week high in London on Wednesday, holding above $1330 per ounce as the US Dollar rallied from new two-year lows on the currency market.
 
Falling to $1.3790 per Euro, the Dollar had dropped almost 1% after September's US jobs data showed much weaker hiring than analysts forecast.
 
"Although December remains a possibility" for the US Federal Reserve to start 'tapering' its $85 billion per month quantitative easing, "this report makes it more likely that the Fed pushes the first reduction in the pace of its asset purchases into 2014," say economists at investment bank Goldman Sachs.
 
Tapering is now most likely to begin in March, they add, when current chairman Ben Bernanke is due to be replaced by Janet Yellen.
 
"We are technically clearly at a key juncture for the development of the next medium-term trend," says investment analysis from Commerzbank in Germany, adding that its chart analysts are now "neutral" on gold prices short-term.
 
"I still believe the upside is limited," says David Govett at brokers Marex, pointing to "the absence of any other positive factors" beyond the declining US Dollar.
 
"We suspect that gold should continue to push higher," says a note from INTL FCStone, also pointing to the weakening US currency.
 
But for the new trend to continue, gold investment and jewelry demand "do need to pick up."
 
Gold investment through the giant SPDR Gold Trust, the world's largest exchange-traded gold fund (ticker: GLD) rose Tuesday for the first time in a month, and by the largest volume in 8 weeks.
 
Adding 6.7 tonnes to the gold needed to back the GLD's shares, however, the trust's assets remained near 56-months lows at 878 tonnes.
 
"We favour selling this rally in gold," says Australia's ANZ Bank, "as the fundamental demand from China seems to be wavering."
 
Hitting $25 per ounce last week, Shanghai premiums for investment gold over and above London benchmarks slipped today to $7 from $8 on Tuesday.
 
New data meantime showed China's biggest banks tripling the amount of bad loans they wrote off in the first half of this year.
 
Forecasting a contraction in China's manufacturing activity for September – due for data release tonight in HSBC's monthly PMI index – "The slowdown is due to weak demand and rising interest rates," reckons chief China economist Zhiwei Zhang at investment bank and brokerage Nomura, speaking to CNBC.
 
Meantime today in India – where finance minister P.Chidambaram repeated the ban on gold coin imports Tuesday – a major bullion-backed mutual fund was reopened to new business after a 3-month suspension, made as the government called for banks to cease promoting gold investment.
 
The $300 million Reliance Gold Savings Trust likely waited for the summer's sharp drop in gold imports reported earlier this month before reopening, Reuters quotes Commtrendz Research director Gnanasekar Thiagarajan.
 
"However, the biggest challenge will be to find gold supplies as it is not available in the market."
 
Premiums on gold in India today held at record levels of up to $125 per ounce above London benchmarks, dealers said, as growing festival demand continued to meet a "drought" of supply amid the ongoing import restrictions.
 
"A large part of jewelers and goldsmiths are on the verge of a closure due to non-availability of gold," says M.C.Jain, president of the All India Bullion & Jewellers Association, which met recently with government officials to discuss easing the gold import rules.

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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