Gold News

Gold Prices Touch 3-Week High on Falling Dollar, 'Restrained US Fed'

GOLD PRICES rose to 3-week highs above $1250 per ounce on Monday in London as the US Dollar extended its decline against other major currencies, writes Steffen Grosshauser at BullionVault.
 
Eurozone investors wanting to buy gold saw it trade just €1 shy of €1100 per ounce – an 8-month high when first reached 9 weeks ago.
 
World stockmarkets edged higher, but commodities slipped.
 
The US Dollar index, which measures the currency's FX rate against a basket of competitors, held near Friday's close at 94.23 – a new 6-month low.
 
"The trend is strong for gold," reckons Gnanasekar Thiagarajan, director of Mumbai-based Commtrendz Risk Management Services, "because it failed to go below the $1200 mark" on stronger-than-expected US jobs data for March.
 
"The Dollar's weakness is [now] supporting gold."
 
"Gold has more factors to argue for higher prices than lower, we believe," agrees HSBC analyst James Steel.
 
"A restrained Fed policy is supportive of gold and considering the market has probably already absorbed the likelihood of two rate rises this year, monetary policy does not look bearish."
 
Silver meantime tracked and extended the move in gold prices, jumping more than 40 cents to reach 3-week highs above $15.75 per ounce.
 
"We will need to see silver breaking its October 2015 high of $16.36 before getting more bullish on the metal," says bullion bank ScotiaMocatta's latest technical analysis – a rise of almost 4% from Monday's highs.
 
Hedge funds and other money managers cut their net bullish position overall in Comex silver futures and options last week, new data showed at the weekend, retreating further from the strongest value since mid-2014.
 
For gold, in contrast – and aside from end-January 2015 – the 'Managed Money' category of traders in Comex futures and options hasn't been as bullish as a group overall since late 2012 as it has been for the last 3 weeks.
Chart of 'Managed Money' net long in Comex gold futures and options
 
Demand for shares in the giant SPDR Gold Trust (NYSEArca:GLD) has meantime swelled by 27% so far this year, boosting the amount of gold needed to back the largest gold ETF to 817 tonnes despite a small outflow last week.
 
A so-called "Shariah standard" is meantime said to be "almost" ready for securitized gold-based investment products acceptable to Islamic law, says Mohd Daud Bakar, a Shariah scholar writing for the Bahrain-based institution AAOIFI
 
"Gold products used in Islamic finance would need to be physically-backed and allocated to the underlying asset," according to the draft, which excludes Comex gold futures.
 
"Hundreds of tons" of new demand could be created, comments Natalie Dempster, a managing director of mining-backed market development organization the World Gold Council.
 
"The standard would fill an important gap in the market."
 
Middle Eastern gold jewelry demand fell 9% last year, according to specialist analysts Metals Focus, and investment demand dropped by one third.

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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