Gold News

Gold Price Jumps 4%, 'Targets $1420' as Euro Banking Crash Sends US Bonds Back to Mid-2012

GOLD PRICES shot higher yet again Thursday, surging 4.1% to hit 12-month highs near $1250 per ounce as world stock markets fell hard yet again, and the US Dollar hit fresh multi-month lows on the FX market following Fed chair Yellen's comments on delaying further interest-rate hikes.
 
Hong Kong's first trading day of the new Year of the Monkey earlier saw the Hang Seng index drop over 3.8%.
 
Shanghai's markets re-open Monday.
 
Crude oil meantime sank 3.5% towards new 14-year lows at $26 per barrel. Major government debt prices jumped as the cost of insuring European banks' bonds leapt, driving 10-year US Treasury yields down to their lowest since August 2012 at 1.57%.
 
Five-year CDS insurance on the debt of German financial giant Deutsche Bank jumped to all time record highs.
 
 
"We continue to view the [gold] market as a base from a longer term perspective," says weekly technical analysis from German bank Commerzbank, pointing to "a large falling wedge pattern which offers an upside measured target to $1450 longer term."
 
Short term, "One shouldn't rule out a $100 move either way," said a bullion-bank's trading note Thursday morning.
 
"If so, the gold selling from miners might recede – although we still see some chunky volumes trading at the [London benchmark] gold auction."
 
Thursday morning's LBMA Gold Price auction opened with the largest volume of sell orders in more than a week, some 70% above the daily average of Q4 2015, when gold prices stood 10% below today's level.
 
The size of those offers then fell – and demand rose to meet them – as the suggested price was lowered to find a balance at $1223.25 per ounce, the highest morning 'fix' since mid-May 2015.
 
The afternoon auction – held at 3pm London time – then drew the heaviest bid volume to buy gold for at least 3 months, totalling 2.6 times the Q4 2015 average at a price of $1241, a new 12-month high.
 
Gold priced in Euros meantime hit its highest level since May 2015, jumping 4.1% from last week's finish to hit €1095 per ounce – a price first seen in June 2011 amid the worsening Greek, Portugal and Ireland debt crisis.
 
"I believe that in the Eurozone, structurally, we are in a much better place than we were a few years ago," said Eurogroup chief Jeroen Dijsselbloem before a meeting of finance ministers from the 19-nation currency union on Thursday.
 
"That also goes for our banks."
 
Italy's prime minister and finance chief were set to complain about the new 2016 regime for so-called banking "bail ins", the Financial Times reports, describing the rules – requiring a minimum 8% write-off of a bank's unsecured creditors and larger depositors before any state aid can be given – as "an increase in instability, rather than stability."
 
Chinese banks may suffer losses 4 times the size of US banks' during the 2006-2011 crisis, reckons hedge-fund manager Kyle Bass, with non-performing loans threatening $3.5 trillion of equity.
 
London-based trust fund provider ETF Securities said Wednesday it has seen "a surge in demand" for exchange-traded products backed by gold, with inflows totalling $720 million so far in 2016.
 

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals