Gold Prices Unmoved as Weak PMIs Boost Eurozone & China Stimulus Hopes, Futures Betting Drops to New 5-Year Low
Monday, 9/01/2014 13:24
GOLD PRICES moved in a $5 range Monday morning below $1290 per ounce, extending the metal's tightest trading pattern in 5 years as European stock markets also held flat ahead of a busy week for data and central-bank decisions.
New York remained shut for the Labor Day holiday.
Ukrainian troops meantime pulled back after failing to take Luhansk Airport from pro-Russian separatists.
Russian president Vladimir Putin yesterday urged talks about the "statehood status" of southeastern Ukraine.
"Sanctions can have an impact for German companies," German chancellor Angela Merkel today told a press conference in Berlin.
"But accepting Russia's behaviour is not an option."
The Euro currency today touched new 5-year lows beneath $1.3125 – helping gold prices in Euro terms rise near Thursday's 2-week highs above €980 per ounce.
Eurozone government bond prices also rose – pushing the yield offered to new buyers down to fresh record lows beneath 0.9% per annum on German 10-year debt – following weaker than expected manufacturing data on the Markit Purchasing Managers Index (PMI) across the 18-state currency union.
Thursday's meeting of the European Central Bank is widely expected to see some move to ease monetary policy still further.
"This could be a mixed blessing" for precious metals, says Jonathan Butler at Japanese conglomerate Mitsubishi, "as a weakening Dollar price of gold is offset by possible safe-haven buying."
"Looser Eurozone monetary policy will not...necessarily lead to higher gold and silver prices," agrees Robin Bhar at French bank and bullion market-maker Societe Generale.
Looser monetary policy would boost "the urge for a hedge against inflation", but would "likely occur because of very weak inflation (or even deflation)," says Bhar. It will also see a stronger US Dollar – "naturally a bearish factor" for gold prices.
Moving only $40 per ounce on the London PM Fix in August, gold prices last month recorded their tightest range since September 2009.
August saw the giant SPDR Gold Trust – the world's largest exchange-traded fund at its peaks in 2011 and 2012 – reverse July's small gold bullion inflows to stand almost unchanged from the end of 2013, then a 5-year low, at 795 tonnes.
Open interest in US gold futures and options last week fell to new 5-year lows, data showed late Friday, as speculators and commercial players both cut the number of contracts they held.
"[Investment] flows so far this year have been rather unexciting," says a gold supply and demand note from Japanese trading house Mitsui's analyst David Jollie.
"If investment flows remain muted, a relatively static price performance might be expected."
Gold prices in China – the world's No.1 consumer nation – also held flat in Yuan terms on Monday, with Shanghai contracts holding a $2 per ounce premium to equivalent London quotes, after new PMI data showed the country's manufacturing growth falling near zero in August.
"The government may unveil some big infrastructure projects if the economy slumps further," reckons investment strategist Wang Weijun at Zheshang Securities in Shanghai.
"The economy still faces considerable downside risks," agrees HSBC economist Qu Hongbin. "[This] warrants further policy easing."
"If we now start to see a serious challenge to growth, the pressure to do more will intensify," says RBS economist Louis Kuijs.
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