Gold News

Gold Price Unmoved in Dollars, Gains vs. Falling Euro as ECB Details QE Plan, 'Market Got Zero Interest' Ahead of US Jobs Data

GOLD PRICES rose in Euros but held flat against the Dollar and other currencies Thursday lunchtime in London as the European Central Bank outlined plans for its new QE asset purchase scheme.
 
Already announced at €60 billion per month until at least September 2016, the ECB's QE will begin next Monday, buying more than €1 trillion of certain public and private-sector bonds in total.
 
Bonds now offering a negative yield – as is the case with €1.9 trillion of Eurozone government bonds, due to their high prices – will be eligible so long as the return is above the ECB's own deposit rate, held today at minus 0.2% per year.
 
Gold priced in Euros touched 3-day highs above €1090 per ounce as the single currency hit fresh 11-year lows to the Dollar.
 
Gold prices in Shanghai had earlier slipped, cutting China's premium above global quotes to $3.50 per ounce, after Premier Li Keqiang opened this year's People's National Congress by setting a "new normal" growth target of 7% for the world's second largest economy.
 
China's long-standing target of 7.5% was narrowly missed in 2014, with the slowest rate of growth since 1990.
 
The Yuan rose Thursday on the currency market.
 
Calling corruption " a blight on people's quality of life," Li stressed that slower growth is necessary for China "to defuse problems and risks [and] avoid falling into the middle income trap" hitting previous fast-growing emerging economies when their labor force – reliant on manufacturing jobs – becomes uncompetitive.
 
Brazil's central bank meantime raised its key interest rate to a six-year high at 12.75% overnight, aiming to curb inflation of 7.4% – almost one percentage point above the government's target.
 
"Gold [priced in Dollars] continues to consolidate ahead of US jobs data tomorrow," says a note from Standard Bank's London team.
 
"Dips sub-$1200 are finding good support and $1195-1192 remains strong congestion area."
 
But outside the Euro's new drop, "It really is extraordinarily quiet at the moment," says David Govett at brokers Marex Spectron, "and interest [in preciouos metals] is as low as I can remember."
 
"At some point gold is going to have to shrug off the interest hike theme, but we still think though that there are always people that won't believe it until it happens," Macquarie analyst Matthew Turner said.
"And those people of course have got history on their side because there hasn't been a rate hike for eight years and every year there has been a forecast of one and it hasn't happened yet," he added. 
 
Friday's US non-farm payrolls data for February "should be quite important," says Australian bank Macquarie's precious metals analyst Matthew Turner, speaking to Reuters.
 
Despite the US Federal Reserve consistently linking the idea of raising rates from 0% to strength in the labor market, "There are always people that won't believe it until it happens.
 
"Those people of course have got history on their side. Because there hasn't been a rate hike for eight years, and every year there has been a forecast of one it hasn't happened yet."
 
The Bank of England today marked the 6th anniversary of cutting UK interest rates to a record low of 0.5% by holding that level again, with no change either to its outstanding £375 billion ($570bn) of QE government bond purchases, some one-third of the UK government's entire debt in issue.

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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