Gold Prices 'Decidedly Bullish' Near $1200, But Dollar Rate-Rise Seen Challenging Even as US Fed Warns on 'Disinflationary Psychology'
Wednesday, 3/25/2015 15:14
GOLD PRICES hit new 3-week highs within 25 cents of $1200 per ounce Wednesday lunchtime in London, but edged back as the Dollar continued its retreat on the currency market and world stock markets slipped.
Silver again rose faster than gold prices, touching new 5-week highs above $17 per ounce before dropping back.
"Momentum indicators are now decidedly bullish," says a gold price analysis from Canadian bullion bank Scotia Mocatta.
"However, the recent rally has yet to test the March 6th open at 1198 [after which gold sank $35] or expected resistance at 1200."
"General expectation," says a London trading desk, "was that a break through $1190 should trigger stops, but these failed to materialize" ahead of Thursday's Comex gold options expiry.
"Look for stops in the $1180-82 area on the downside and $1206 on the upside. In the meantime trade the $1185-1205 range."
Longer term in 2015, "Gold prices may weaken," says the new
2014 Gold Yearbook from New York-based consultancy CPM Group, pointing to "investors' likely negative views toward gold and commodities in the face of imminent US interest rate increases."
There is "no compelling reason" to raise US interest rates any time soon, former advocate of strong Dollar rates, US Fed member Charles Evan today told an audience in London. Indeed, the currency's recent strength risks embedding "clear disinflationary pressure" into economic expectations, depressing activity.
But with gold prices already 35% down from the 2011 peak, "People are less fearful now," Bloomberg quotes CPM director Jeffrey Christian, "and barring any catastrophe, there are no reasons for people to rush to gold."
Having been dominated by bearish bets ahead of last week's US Fed statement on maintaining its zero interest rate policy, the top five strikes in Comex April gold options – set to expire tomorrow – are now 60% bullish, according to Reuters data.
Gold bullion holdings for the New York-listed SPDR Gold Trust (NYSEArca:GLD) were unchanged near 3-month lows Tuesday, but other gold ETFs saw outflows according to Standard Bank's London team.
The giant iShares Silver Trust (NYSEArca:SLV) shed 45 tonnes Tuesday as the number of shares in issue – backed by the trust's metal – fell to a 1-month low.
"ETFs back to the recent trend – liquidation," says Standard Bank's trading-desk update. "Still above the lows seen in January, but reflecting the general sentiment for precious metals, especially as equities keep trading near recent highs."
China's main stock market hit fresh 7-year highs Wednesday morning after the People's Bank cut a key lending rate for the 3rd time this month.
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