Gold News

Gold Price Jumps as Missile Test in Med' Keeps "Syria Risks High"

The GOLD PRICE jumped $15 from a drop to $1384 per ounce Tuesday morning in London, rising after the Interfax news agency in Russia – political ally of Syria's President Assad – reported two "objects" being fired in the Mediterranean, towards the sea's eastern coast.
 
The gold price then fell back only to rise and touch $1400 for the first time this week – 2.5% below last Wednesday's 3-month high – as Israel confirmed the launch, saying it was done to test what Reuters calls a "US-funded" anti-missile system.
 
"As long as Syria stays quiet, I would rather sell rallies [in the gold price] at the moment," says David Govett at brokers Marex.
 
But "we would also expect [the gold price] to find support on pull backs," says Walter de Wet at Standard Bank in London, "not only because Asian demand is likely to improve with gold below $1400, but also because geo-political risk around Syria remains high and oil prices elevated.
 
"This may also keep ETF liquidation at bay."
 
Western investors sold exchange-traded gold funds heavily in the first half of 2013, leading gold ETFs to shed 650 tonnes of bullion.
 
Holdings have since stabilized some 25% below end-2012's record levels.
 
Over in Asia and the Middle East notes Commerzbank's commodity research team, "Physical gold buyers who had hugely stepped up their purchases after the gold price collapsed in the spring, appear to be acting opportunistically and with great price sensitivity.
 
"In the wake of the latest price rise, it seems that they have withdrawn again," says the German bank, pointing to August's drop in US gold coin sales, plus today's news of a 7-month low in Turkey's gold bullion imports.
 
Reviewing last week's pop above $1430 per ounce as the UK and US debated immediate action against Syria's Assad regime for an apparent chemical weapons attack on civilians, "If air strikes take place gold could well fall," writes Jonathan Butler at Mitsubishi, "and if this takes place against a backdrop of QE tapering, the downwards correction could be sharp."
 
The US Federal Reserve is widely expected to announce a reduction of its $85 billion-per-month QE program at its policy meeting in two weeks' time.
 
Meantime, the gold price "should be well supported in the coming days," says Butler. "But Friday’s US payroll data may be negative for gold, however."
 
Asian stock markets rose overnight, with Japan's Nikkei adding 3% and the Shanghai index now regaining half of June's 15% plunge after new data indicated lower new order for China's manufacturers, but strong expectations for the future.
 
European stock markets held flat overall. Both the Euro and Sterling slipped against the Dollar.
 
Ten-year US Treasury yields rose to 2.84% as bond prices fell. Brent crude oil added 0.7% to rise above $115 per barrel.
 
Silver bullion meantime rose further above $24 per ounce, reaching 4-session highs some 5.7% above Monday morning's early low.

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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