Gold Prices Leap to 1-Week on "Short Covering" as Stock Markets Fall, Shanghai's New FTZ Contracts Show Zero Volume as Silver Spikes 3.8% from 4-Year Low
Tuesday, 9/23/2014 14:53
GOLD PRICES retraced half of the morning's 1.4% jump Tuesday lunchtime in London, trading at $1225 per ounce after touching 1-week highs near $1234 as world stock markets fell.
Chinese manufacturing activity was reported better-than-forecast on the HSBC PMI survey, but Eurozone factory growth has slowed hard according to the Markit data agency.
US air-strikes meantime hit Islamic State targets inside Syria for a second day, joined by allied warplanes from five Arab nations.
Commodity prices bounced from new 5-year lows and major government bonds also rose, nudging long-term interest rates lower again.
Silver followed and extended the rally in gold prices, rising 3.8% at one point from Monday's new 4-year lows before easing back to unchanged on the week so far.
"Geopolitical tensions are on the rise again," Bloomberg quotes a fixed-income strategist based in Edinburgh, "prompting some renewed safe-haven flows into US Treasuries."
"Gold seems to have been supported by some safe-haven buying," adds a Mumbai commodities analyst.
But while "Mid-East headlines of Israel shooting down Syrian warplane supposedly added the bid to gold," says one London bullion desk's trading note, "technical [chart patterns] played a larger part."
Latest data showed hedge funds and other speculators holding
more bearish bets against gold prices than any time since end-2013 last week, while money managers as a group turned bearish overall on silver futures and options.
Such a
"net short" position in silver this June was followed by a 15% jump in bullion prices as bears were forced to close their bets at a loss.
"Stops were triggered [this morning]," says today's trading note, "and scale up selling [by bearish traders] ran into very firm bids."
Earlier in Shanghai, trading volume in Shanghai's domestic gold contract was again well above recent averages on Tuesday. But trading in the city's new free-trade zone contracts for international players fell once more.
Recording zero volume on Monday, the new iAu995 wholesale gold bar contract was joined by the 100 gram contract in failing to show volume or price on today's Shanghai Gold Exchange's report.
"There's no major support until $1182...the December 2013 low," says a chart analysis by Swiss bank UBS today.
"Any upside moves in the interim would be viewed as recoveries within a downtrend, providing fresh selling opportunities."
"We've no interest whatsoever," adds trading tipster Dennis Gartman, "in [trading] gold in US dollar terms, either bullishly or bearishly.
"With most commodities clearly moving from the upper left to the lower right on the charts, any attempts or wishes to own gold in Dollar terms is abruptly rendered ill-advised."
"With broader conditions in the US continuing to improve, we expect the Dollar to maintain a firm tone," agrees an Indian bullion analyst, advising against buying gold.
But on the contrary, says Societe Generale strategist Albert Edwards, the Dollar's recent strength is in fact due to a "rapidly weakening Japanese Yen" which "spell[s] trouble for the global economy.
"The Chinese economy will see a further rise in its already strong real exchange rate [denting exports]...[meaning] a wave of deflation washes in from the rapidly devaluing east. This reverses a decade long trend."
With Philadelphia Fed president Charles Plosser announcing his retirement on Monday, "Two dissenters" against the US central bank's zero-rate and QE policies
will stand down next year, notes the
New York Times, as Dallas Fed chief Richard Fisher is required to quit in spring.
"We need to be very cautious and
careful about starting to raise rates," said Minneapolis Fed president Narayana Kocherlakota – a voting member this year – in a speech, "because we do want to be sure that inflation is on the path back to 2%."
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