Gold News

Gold Price Slips on Strong US GDP, But Heads for 10% July Gain Ahead of Fed Vote, "Real Rates Matter Less"

The GOLD PRICE fell back to $1320 per ounce Wednesday lunchtime in London as new data showed the US economy expanding faster-than-expected.
 
Second quarter GDP rose 1.7% in real terms from a year earlier, the Bureau of Economic Analysis said. 
 
Inflation in consumer goods and services fell to 0.0%.
 
Falling almost $20 from an earlier 1-week high, the gold price at $1320 dropped back to its crash low of mid-April, when prices tumbled $250 per ounce in 3 sessions.
 
The US Dollar had today already jumped half-a-cent against both the Euro and Sterling – and driven the Brazilian Real to 4-year lows – after strong jobs growth was reported by the private-sector ADP Payrolls report.
 
Official non-farm payrolls data for July are due this coming Friday.
 
Ten-year US Treasury yields jumped Wednesday to 3-week highs at 2.66% as bond prices fell.
 
Washington's creditors have now lost money for three months in succession, lagging world stock markets by well over 5 percentage points according to Bloomberg data.
 
"The influence real US interest rates have on gold has receded over the last few decades as demand has shifted from West to East," says a new research paper from market-development organization the World Gold Council today.
 
The relationship between the gold price and real US interest rates, adjusted for inflation, "is less clear when viewed in the context of other fundamental factors," the report goes on, pointing to movements in the US Dollar, equities, and gold-price volatility.
 
The gold price has rallied nearly 10% in July against the Dollar after losing 25% over the April-June quarter.
 
Versus Euros and Sterling, the gold price has added more than 6% this month.
 
Silver meantime failed to break back above $20 per ounce Wednesday morning, holding 5.6% higher for the month of July on the London Fix but then slipping back to $19.44 after the US GDP data.
 
Over in India, "We hope to contain gold imports at a level well below last year's total imports," said finance minister P.Chidambaram on Wednesday.
 
Imposing yet more  new restrictions on gold importers in July – and already doubling Indian premiums over world benchmark gold prices – "[That will] save considerable amount of foreign exchange," says Chidambaram, "which will have a positive impact on the current account deficit."
 
Investment bank and bullion dealer Standard Bank of South Africa was meantime reported by a source to be close to selling its London commodity trading business to China's giant ICBC bank.
 
Standard's largest shareholder, ICBC was recently ousted by the US Wells Fargo as the world's largest bank by stock-market value.
 
"Institutional investors in the Western Hemisphere [have] revealed strong negative feelings towards gold," says a note from London market maker UBS.
 
"In contrast, retail investors in Asia – who account for the bulk of physical buying – have found good value in this year's lower gold prices."
 
US hedge-fund manageer David Einhorn was quoted Tuesday telling clients that his view on gold prices "has not changed" and that Greenlight Capital continues to split its exposure equally between physical gold bullion and mining stocks.

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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