Gold News

Gold Prices 'Consolidate' as Dollar Bounces Post-Fed from 5-Month Low, Silver Speculation Jumps

GOLD PRICES dropped 1% on Monday from their second-highest weekly close in 13 months, writes Steffen Grosshauser at BullionVault, edging down to $1243 per ounce as the US Dollar rallied from its lowest level on the FX market since October.
 
Asian stocks rose sharply, but Europe and New York equities slipped after finally getting into the black for 2016-to-date for the first time after the US Federal Reserve held Dollar interest rates unchanged last week and cut its forecast of rate hikes from four to two this year.
 
"[The FOMC's forecast] should put some downward pressure on the Dollar and hence should be supportive of gold," reckons Marko Kolanovic at US investment bank J.P.Morgan.
 
"We think the metal is consolidating at the current level, before testing the next near-term resistance at $1307," said Canadian Scotiabank's latest daily analysis, pointing to the gold price high from January 2015.
 
"Due to the Easter holiday, the market will probably consolidate," one trader in Singapore is quoted by the newswires, saying that "overall the market trend looks weak but well supported."
 
"Investors are likely to do better by betting on gold," adds Kolanovic, considering the likelihood of Donald Trump becoming the next US president and imposing tariffs against Chinese goods.
 
"The US Dollar could be under some pressure if you have these types of policies." 
 
Monday saw the US Dollar's trade-weighted index against a basket of other currencies hold 0.5% higher from Friday's new 5-month low, while gold prices retreated 2.3% below Thursday's high of $1270, hit the day after the Fed meeting but some $12 below the previous week's 13-month high.
 
Brent crude oil on Monday traded around $41 per barrel, while base metals led by copper also retreated from an 11-month high.
 
Thanks to copper miners slashing output, "Silver mining production will fall this year for the first time in more than a decade," says Bloomberg News, paraphrasing analysis from French investment bank Societe Generale and Asia-focused Standard Chartered, both pointing to how two-thirds of the world's new silver comes as a by-product from other mining.
 
Silver has so far gained 14% in 2016, holding firmer than gold at $15.85 on Monday but lagging the dearer metal's gain of 17% since New Year.
 
Money managers playing US silver derivatives last week cut their bearish bets to the lowest since mid-2014 ahead of the Fed's no change decision, taking the "net long" position to its second highest level on record.
Chart of CFTC reported Managed Money positions in Comex silver futures and options
 
Gold futures and options were less bullish, with hedge funds and other 'managed money' accounts trimming their net long position 1% from the previous week's 12-month high.
 
Meantime Monday in India – the world's largest consumer gold market – jeweller trade associations called off an indefinite strike after gaining government assurance that their members will not be "harassed" by the tax authorities in collecting a new 1% excise duty, levied on consumer gold sales by last month's new Budget.

Steffen Grosshauser is Senior Operations Executive and Head of German-speaking Market at BullionVault, the worldwide biggest physical gold and silver market for private investors.

See all articles by Steffen here.

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