Gold News

Gold Price 'Dollar Dependent' in 2015 Say Analysts as Beijing Denies $1 Trillion Stimulus, Dents Shanghai Stock Market

GOLD PRICES recovered a $5 drop Thursday lunchtime in London, trading again at $1212 per ounce as the US Dollar edged back from fresh 9-year highs to the Euro and Western stock markets extended their rally.
 
The Shanghai stock market meantime closed 2.4% lower however, after a Beijing official denied claims of a $1 trillion stimulus, saying that accelerated investment into national infrastructure was coming from private sources and "is fundamentally different" from China's massive stimulus of 2008.
 
A "new normal" in China – the world's No.1 or 2 gold consumer nation with India in 2014 – means it will maintain a "medium to high growth rate" added President Xi Jinping at a separate event in Beijing on Thursday.
 
Chinese gold premiums to global prices today held steady at $4 per ounce on Shanghai's main contract.
 
Shares in Chow Tai Fook (HKG: 1929) meantime rose 2.2% despite the world's biggest jewelry retailer reporting a 10% drop in Q4 sales from the last 3 months of 2013, with same-store sales in Hong Kong – hit by a wave of pro-democracy protests in late 2014 – down more than one-fifth.
 
"China's emphasis on environmental protection," says the latest Commo Hebdo from French investment and bullion bank Natixis, "may hold back demand for fossil-fuel energy in 2015. [But] there remains scope for robust growth in Chinese demand for industrial metals."
 
For gold prices in contrast, "The biggest driver behind the price of gold in 2015 will be the strength of the US Dollar," say Natixis' commodities analysts. "Second will come Asian demand, followed by [gold miner] producer hedging.
 
"As the Dollar strengthens, so the need for gold as a 'safe haven in times of crisis' dissipates."
 
But with monetary policy now "loose" around the world, counters Evy Hambro – manager of Blackrock's $1.5 billion Gold & General fund – adding to "fears" of deflation, "people will want to reach out for safe assets.
 
"Gold is the natural place that people will move to as a store of wealth."
 
Indeed, "Further USD strength could trigger safe haven demand for bullion," reckons a new 2015 forecast from London market maker HSBC, raising its annual average target 5% to $1234 per ounce.
 
Wednesday's release of minutes from the US Federal Reserve's latest policy meeting "failed to send a strong signal on the likely timing of [interest-rate] tightening," says a note from French bank BNP Pariba, meaning "the Fed is data dependent."
 
But with the Fed suggesting again it may hike rates from 0% sometime mid-year, says the bullion desk at Germany's Commerzbank, "gold reacted by posting modest gains with Brent [crude oil] to $51 per barrel, showing that the market has sufficiently priced in the rate increase already."

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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