Gold News

Gold Price Bounces from 1-Week Low as Euro Rallies, US Data Disappoints, ECB QE 'Fails to Fix' Eurozone

GOLD PRICES rallied fast against the Dollar on Tuesday afternoon in London, recovering from 1-week lows as New York's stock markets dropped 1.7% following a shock decline in durable US goods orders reported for December.
 
Last year's flat Dollar gold prices, separate data showed Tuesday, came as China's gold imports through Hong Kong fell 30% from 2013.
 
The Dutch National Bank meantime denied it bought any gold in December after a "fat finger" error on the International Monetary Fund's database led Reuters and other news outlets to say the Netherlands had expanded the world's 10th largest state holdings.
 
"Comex option expiry tonight," notes Swiss refining and finance group MKS of US gold derivatives, "with a million ounces of open interest around $1300, and large open interest at $1250."
 
With February Comex options now being closed, well over 80% of the five most popular options on March gold futures are bullish calls – betting on prices rising – according to Reuters data.
 
"Gold confirmed an inverted head and shoulders pattern," says technical analysis from French bank and London market maker Societe Generale, pointing to a bullish chart pattern with "potential" to reach $1342 per ounce.
 
That level would be just shy of the Dollar gold price's 12-month peak of July 2014.
 
Rounding up the Netherlands' 19.619 million-ounce holdings to 20.0moz, the IMF's data showed an additional 9.1 tonnes in the DNB's reserves for last month
 
No Western European state has bought gold bullion since the late 1980s. Eurozone central-bank holdings have shrunk 15% to 10,785 tonnes since the turn of the century.
 
"It is time to speak the truth," says Texas University economics professor and author Yanis Varoufakis – now set to become finance minister in the new Syriza-led Greek government – "about the unsustainability of the major denial with which Europe treated a bankruptcy in its midst and an architectural problem of the Eurosystem."
 
Winning one-third of the popular vote and half the seats in Sunday's snap Greek elections, Syriza is pushing for debt write-downs and a restructuring of its IMF, Eurozone and ECB bail-outs starting 2010.
 
The largest single chunk of Greece's outstanding €323 billion in debt is owed to German banks, analysis published in The Times says today.
 
"There's nothing wrong with fiscal austerity," says Standard Bank FX strategist Steven Barrow in London, "but when Germany refuses to fiscally expand and so maintains very low inflation rates of its own, others are almost forced to run with negative inflation [ie, domestic deflation] to avoid competitive loss.
 
"Does QE from the ECB help solve any of this? No it does not."
 
"The ECB's quantitative easing is too little, too late," agrees The Banker magazine today.
 
Some 16% higher for 2015 to date, Euro gold prices held flat on Tuesday as the single currency extended its bounce from Monday's new 11-year lows to nearly 3 cents, touching $1.1390.
 
London and Eurozone stock markets turned lower, but longer-term US Treasury bonds rose in price after the poor US data – driving 30-year yields down to near-record lows at 2.33% per year.
 
Germany's chief finance regulator at BaFin, Raimund Röseler, meantime said his staff had found " no evidence of manipulation" in gold price benchmarks following an investigation of former London Gold Fix member Deutsche Bank. 

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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