Gold News

Gold Price 'Positive' as Dollar Rises, China Crash Stemmed, Oil Erases Spike

GOLD PRICES gained versus a rising US Dollar in Asia and London Tuesday, touching $1080 per ounce for the second day running as Beijing intervened to stem a second crash in China's stock market, and crude oil reversed yesterday's surge from new 11-year lows despite increased Middle East tensions.
 
Western stock markets crept higher after China's securities regulator injected $20 billion into its domestic money markets and warned of new measures to prevent corporate insiders from selling stock.
 
US Treasury bonds rose in price again, however, as commodity markets held flat and the Euro retreated to a 1-month low against the Dollar after weaker-than-forecast Eurozone inflation data.
 
"That gold gained this week on the back of risk-off sentiment and equities selling off is a positive for gold," says a note from Swiss investment and bullion bank UBS, because the metal had shown "unstable performance as a safe haven" by moving closely in line with stockmarket shares during the last 3 months of 2015.
 
"Now that the Fed has started its tightening cycle, there is scope for some normalisation...Gold needs to re-assert its role as a safe haven and as a viable hedge against investors' exposure to equities.
 
Monday's action saw no net inflows or redemptions from either the giant SPDR Gold Trust (NYSEArca:GLD) nor the iShares Silver Trust (NYSEArca:SLV).
 
For non-Dollar investors, Tuesday saw gold priced in Euros hit 1-month highs above €1005, while the Sterling gold price hit 2-month highs above £736 as the Pound fell to its lowest USD value since April 2014 despite a stronger-than-expected reading of UK construction sector activity on the CIPS-Markit PMI survey. 
 
"With gold and silver prices having been the best of a bad bunch in 2015," says the latest weekly note from analyst Jonathan Butler at Japanese conglomerate Mitsubishi, "commodity investment index rebalancing [around] 8-14 January could see a sell-off in these metals and some net buying of [platinum-group] metals.
 
"However, the volumes traded are likely to be quite modest in comparison with recent movements in speculative futures positioning," Butler adds, and so "price impacts may be limited."
 
New data released Monday showed large speculative traders in Comex gold futures and options ended 2015 holding just 1.18 bullish for every 1 bearish bet – the lowest New Year's ratio since 2001.
CFTC positioning data for Comex gold futures & options
 
Notionally equivalent to 73 tonnes of bullion, last week's net speculative position of bullish minus bearish bets was larger than start-December's new 14-year low, but 49% smaller than the last 5 years' average.
 
Comex silver contracts, in contrast, ended 2015 with large speculators holding a net bullish position equal to 85% of the last half-decade's average, and substantially larger than New Year's Eve 2011 or 2013.
CFTC positioning data for Comex silver futures & options
 
Having dropped all of Monday morning's 5% jump in late afternoon trade, Brent crude oil meantime held little changed today around $37 per barrel.
 
That extends a run of the highest Gold/Oil ratio since the late-1990s according to Reuters' data, with one ounce of bullion now worth 29 barrels against a low beneath 7 barrels at oil's peak price of 2008.
 
Sunni-majority  Kuwait today followed Bahrain and Sudan in recalling its ambassador to Iran following Sunday's violent protests at Saudi Arabia's embassy in Tehran over Riyadh's execation of a Shia cleric.
 
"There is no chance of Saudi Arabia scaling back its oil supply to make space for Iranian oil if the sanctions against Iran are lifted," note commodity analysts at Frankfurt-based banking and financial services provider Commerzbank – something the German Federal Foreign Ministry says could happen in January.
 
"In other words," Commerzbank says, "the existing oversupply [of crude oil] may actually grow further in the short term" rather than prices spiking on the political row.

 

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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