Gold News

Gold Price Marks Crash Anniversary by Rising to April '13 Low as US Tech Slump Spreads

GOLD PRICES slipped again from near 3-week highs above $1324 per ounce in London trade Friday lunchtime, as world stock markets fell after yesterday's slump in US tech stocks.
 
Dropping $6 per ounce after spiking from $1314 as the US Dollar rose on the currency market, gold prices were heading for their 12th weekly gain in 15 so far in 2014.
 
Twelve months ago tomorrow, the gold began a 15% crash which took it through what analysts called strong support at $1535, bottoming on Monday 15 April at $1322.
 
"The gold price is continuing to find support from the unexpectedly dovish Fed minutes from mid-week," says Germany's Commerzbank, citing earlier Dollar weakness.
 
Sterling and Euro gold prices rose Friday, but held flat from last week's finish vs. the Dollar price's 1.2% gain.
 
"Precious metals prices have proven resilient," says London market-maker Deutsche Bank, again pointing to Dollar weakness and Wednesday's release of US Federal Reserve meeting notes.
 
The Fed "indicated unease with overly hawkish interpretations" of last month's statements on raising rates in 2015, says Deutsche, warning that a Dollar rally is likely this quarter.
 
"Without the dovish [Fed] minutes," says Swiss bullion bank UBS, "we expect that gold would have traded lower. But gold has been wrong-footing many this week."
 
The Chinese Yuan meantime fell to a 1-week low today, while the Shanghai stock market bucked the global trend to end 3.7% higher from last Friday.
 
Tracking US biotech stocks drop, however, "the average fall for Asian internet stocks in the past month has now topped 20%," reports the Financial Times.
 
Despite the falling Yuan, the Shanghai gold price – typically at a premium to world benchmarks – reduced its discount to $2.50 per ounce below London quotes by the close of Chinese trade.
 
The Shanghai Gold Exchange said Friday it will launch "a rudimentary version" of the gold lending contracts used in London, heart of the world's physical gold market.
 
Gold borrowing costs rose again in London again Friday, as lower GOFO rates reduced the incentive offered to would-be borrowers, who must pay storage and lose cash interest for the period of a gold loan.
 
Two-month GOFO today went negative for the first time since late February, meaning that lenders are asking for payment on top of the interest they earn during a gold-cash swap.
 
One-month GOFO has now been negative, albeit at 0.05% annualized at the most, for 38 of 72 gold trading days in London so far in 2014.
 
That suggests what analysts have called some "tightness" in London's wholesale market, contrasted with the plentiful supply in Shanghai suggested by its discount to world prices.

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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