Gold News

Gold Price Flips at $1080 as Fed 'Set On Hike', Eurozone Vows to Inflate, India's Gold Bond Scheme Launch Fails

GOLD PRICES edged back after recovering last week's finish late Friday in London, trading 1.3% above Tuesday's near 6-year low at $1065 per ounce as Western stock markets rose with the Dollar following fresh hints from US Fed policy-makers that a December interest-rate rise is a foregone conclusion. 
 
"We have done everything we can to avoid surprising the markets...when we move," said the US central bank's vice-chair Stanley Fischer at a conference in San Francisco, while Atlanta Fed president Dennis Lockhart said he's now " comfortable with moving off zero soon," but the path of further hikes will likely prove "slow [and] halting."
 
In contrast the Fed, Eurozone monetary policy will become easier still said ECB president Mario Draghi in a speech Friday, vowing to do "what we must" to raise the near-zero rate of inflation.
 
Bullion flipped back below $1080 – a key technical gold price level according to some analysts – while silver headed for a 0.5% weekly drop at $14.18 per ounce.
 
"Finding support from a somewhat weaker US Dollar [overnight] precious metal prices have been recovering since yesterday," notes German bank Commerzbank.
 
"Candle charts suggest...we have entered [a] corrective cycle after our long $1090 to $1066 down move," said a technical analysis from bullion bank Scotia Mocatta overnight, pointing to $1095 and $1114 as near-term targets.
 
"As the market moves into a corrective phase," agreed the Asian dealing desk at Swiss refiner and finance group MKS this morning, "it's likely gold will test top-side targets of $1095-1100 [but] further resistance sits around $1110."
 
Chinese gold prices rose again Friday on the Shanghai Gold Exchange, adding another 0.8% to a 3-day high and holding a firm $3.60 per ounce premium above London quotes.
 
China state broadcaster CCTV today reported the release of new gold bars marking 2016 as the Year of the Monkey on the Chinese zodiac.
 
New customs data from Switzerland – the world's No.1 gold bar refining center – show October was the strongest month in 7 for gold exports direct to China, notes Commerzbank, while shipments to Hong Kong slipped but held "solid".
 
"By contrast," the bank's commodities team go on, "exports to India totalled a mere 21.5 tons...a surprisingly low figure given the high religious festivals of Dhanteras and Diwali in
November, which are generally accompanied by high gold demand."
 
With the Diwali festival now being followed by India's key wedding season for gold gifting, the BJP government of Narendra Modi's new scheme to "unlock" some of the sub-continent's estimated 20,000 tonnes of existing private gold holdings – and use them to meet future demand, reducing the need for imports – has so far gathered less than half-a-kilo according to Finance Ministry sources speaking to the Wall Street Journal.
 
New Delhi's other gold initiative – a Sovereign Bond paying 2.75% annual interest while tracking the Rupee gold price – meantime closed its first offering today with some INR145 crore raised from private savers ($22 million) according to Financial Express.
 
At current rates, that means the scheme launched two weeks ago has deterred some 633 kilograms of gold investment.
 
India's gold bar and coin demand last year totaled 207 tonnes according to data compiled by specialist analysts Metals Focus for market-development organization the World Gold Council – an average fortnightly pace of almost 8 tonnes.

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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