Gold News

Gold Price Slips from 2-Week High on US Jobs Data, Rising Comex Warehouse Stocks "Suggest China Slowdown"

GOLD PRICE gains of 1.6% for this week so far were trimmed lunchtime Thursday in London, with spot quotes dropping $5 per ounce after better-than-forecast US jobs data.
 
Retreating from $1324, the gold price had also touched 2-week highs for Euro and Sterling investors, after the Bank of England kept UK interest rates unchanged at 0.5% for the 60th month running.
 
Initial claims for US jobless benefits fell last week to 300,000 vs. analyst forecasts of 320,000, the Department of Labor said.
 
US import prices meantime rose faster-than-expected last month, separate data showed, cutting the 1-year drop to minus 0.6%.
 
China's domestic gold price earlier closed at its highest level since March 24 in Yuan terms on the Shanghai Gold Exchange.
 
But in Dollar terms, the gold bullion price in China – now the world's No.1 consumer market – returned Thursday to a discount to the global benchmark of London settlement, trading $3.50 per ounce below spot.
 
Shanghai gold typically trades at a premium to the London price, but has now closed at a discount on all but 3 trading days in the last 7 weeks, by far the longest stretch in at least years.
 
"We should not lose sight of what has been a strong Chinese market so far this year," said London-based consultancy Metals Focus in its latest weekly report Tuesday, "still on course to post its second highest level for gold demand on record."
 
But noting a 2-week rise of 15 tonnes in Comex warehouse stockpiles in the United States, "The US [gold industry] has become increasingly reliant on shipments to China," the report adds, "reflect[ing] field research that suggests flows into the country slowed considerably last month."
 
Comex warehouse gold stockpiles track prices higher and lower in the main, showing a strong correlation of 89% over the last 18 years according to Bullionvault analysis of weekly data.
 
Total Comex warehouse gold stockpiles edged back Wednesday from the largest level since June 2013 at 245 tonnes.
 
"There is certainly no physical tightness in gold," Reuters quotes Bill O'Neill at LOGIC Advisors in New Jersey.
 
" Why would you scramble for any physical gold stocks when the market appears to be going nowhere at this point?"
 
Growing availability of gold in Comex warehouses "represents the end of the drawdown in stocks seen last year," says the newswire, "when gold's record two-day drop in prices unleashed years of pent-up buying by Asian investors who spotted a bargain for coins and small bars."
 
New data released overnight showed China returning to a trade surplus in March, even though total trade fell sharply.
 
Exports fell 6.6% by value as imports fell 11.3%.
 
Bullion held to back shares in the giant SPDR Gold Trust (NYSE:GLD) meantime ended Wednesday unchanged having edged back to 806 tonnes Tuesday, the lowest level in a month.
 
The world's largest exchange-traded trust fund at its peaks in 2011 and 2012, the GLD began 2013 with a near-record 1,350 tonnes, dropping nearly 60% by value as the gold price fell 30%.

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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