Gold News

Gold Price Spikes on Weak US Jobs Data as US-Russia Meet Over Ukraine, Holds Tight Range as China Faces "Bear Stearns Moment"

The GOLD PRICE spiked $5 per ounce from a tight range around $1335 per ounce Wednesday lunchtime in London, as weaker-than-expected US jobs data saw the Dollar drop sharply on the currency markets.
 
The Dollar then recovered however against the Euro, and the gold price edged lower to trade 1.3% below Monday's 4-month highs, hit after the weekend's sudden escalation of Ukraine-Russia tensions.
 
Wholesale silver bars tracked the gold price spike and fall Wednesday morning, making a shallow recovery above last week's closing level of $21.22.
 
Palladium jumped 4% from Tuesday to 11-month highs as analysts said possible trade sanctions over Russia's bluntly-denied troop movements in Ukraine's Crimea region may threaten global supplies.
 
US secretary of state John Kerry was due Wednesday to meet Russian foreign minister Sergei Lavrov in Paris.
 
Ahead of Friday's official non-farm payrolls report, today's private-sector ADP data said US firms hired 139,000 workers net in February, more than January but below analyst forecasts.
 
"The gold price has found a near-term cap at the trendline from May 2013 at 1355," says a technical analysis from Credit Suisse, "and is close to our...chart objectives at 1362/66."
 
But the "removal of 1307/02 [would be] needed to signal a deeper setback."
 
"There’s scope," agrees fellow Swiss bullion bank UBS, "for more upside in the near-term."
 
The gold price "looks set to test the major resistance at 1361.93, the October 2013 high."
 
"Support from the uptrend comes in at 1313," says bullion bank Scotia Mocatta's latest technical analysis, also putting nearby resistance around the $1360 level.
 
"We are bullish gold, looking for a full retracement to the $1433 high from [August] 2013."
 
Today in China, the No.1 gold consumer nation, wholesale discounts to the global gold price eased back to 21c per ounce from Tuesday's $2.80, suggesting an improvement in local demand over supply.
 
But trading volumes on the Shanghai Gold Exchange fell again, dropping to half Monday's 3-month high.
 
Warning of a " Bear Stearns moment" in China's corporate bond market, analysts at Bank of America "doubt that the financial system in China will experience a liquidity crunch immediately...but the chain reaction will probably start" with a likely default by solar-cell mnufacturer Shanghai Chaori Solar Energy Science & Technology Co. o meet $15 million-worth of interest payments on Friday.
 
Now valued at $4 trillion, China's publicly-traded debt market hasn't suffered any defaults since the People's Bank began regulating it in 1997, says Bloomberg.
 
Last month saw China's first "wealth management product" default in what's become a $1.8 trillion industry.
 
From the mid-2007 failure of two Bear Stearns' hedge funds holding subprime mortgage bonds, the global financial crisis took another year to reach the collapse of Lehman Brothers and the tax-funded bail-out of AIG, its counterparties, and much of the Western banking sector.

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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