Gold News

Gold Prices Up 2% for Week Despite Strong US Jobs Data as China Property Default Fears Spread

GOLD PRICES made a brief spike to $1216 per ounce Friday lunchtime in London as new US jobs data beat analyst expectations but fears over debt defaults in China's real-estate sector spread.
 
Edging back to $1212, gold priced in Dollars then held flat for the last 3 days, some 2.0% up for the week.
 
Non-farm US payrolls added 252,000 net jobs in December, the Bureau of Labor Statistics said, ahead of consensus forecasts of 240,000.
 
Thanks to a further drop in labor-market participation, the jobless rate fell faster than expected to 5.6%.
 
Bloomberg meantime reported that Chinese property developer Kaisa Group (HKG:1638) – whose shares were suspended on the Hong Kong stock market in December after halving in one month – may have paid $25 million of interest due on $500m of debt, avoiding the first default in China's real-estate sector.
 
The S&P ratings agency this week downgraded Kaisa to "selective default", and with Kaisa's total liabilities standing over $12 billion, "the damage is already done," Bloomberg quotes one Hong Kong bond trader.
 
"Last year when talk of Chinese defaults started doing the rounds," says a note from Standard Bank's commodity desk, "copper prices saw a decline of 10%."
 
Copper priced in Dollars today fell to new 4-year lows, while European Brent crude oil gave back the week's rally above $50 per barrel, a new 5-year low.
 
"Gold and platinum," says new research from David Jollie at Japanese trading house Mitsui, "should benefit most from strong Chinese demand ahead of the lunar (Chinese) New Year.
 
"Since 2001, the precious metals have typically performed well in price terms in January and February...even in extended periods of price weakness."
 
"We saw consistently strong buying this week," Reuters today quotes a Shanghai gold trader, adding that "premiums and volumes are better than what we saw in the last month."
 
Shanghai gold premiums, over and above comparable London quotes, today rose to $4.50 per ounce on China's main 'spot' contract.
 
The Shanghai Gold Exchange's new "international" gold bar contract – traded for settlement inside the city's free trade zone – also rose $4 above world prices, but on very low volume.
 
"China's demand for gold has picked up judging by import volume and deliveries from the Shanghai Gold Exchange," says London market maker Scotia Mocatta in its new Metal Matters monthly.
 
Western hedge funds are meantime "increasing net long exposure" to US Comex futures and options "on the back of fresh buying and short-covering," it adds.
 
But "we are wary," the bank's analysts conclude, "that the safe-haven buying may not last if concerns over Greece subside."
 
European central bank chiefs were presented this week with detailed plans for €500 billion of QE bond and other asset purchases, press reports said Friday, citing an apparent attendee in Frankfurt.
 
The ECB next votes to decide monetary policy across the 19-nation currency union on Thursday 22 January, three days before Greece's snap election, currently led by the anti-austerity, anti-Euro Syriza party.
 
Euro gold prices re-touched this week's new 16-month high at €1030 per ounce as the single currency slipped near fresh 9-year lows following the US jobs data.

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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