Gold News

Gold Prices Lose 'Important' $1200 Mark Again After 'Breaking Downtrend' as Dollar Rises, China Equities Surge

GOLD PRICES slipped against the rising Dollar lunchtime Monday in London, dropping through what one trading desk called "the psychologically important" $1200 per ounce mark as the US currency hit fresh multi-year highs on the FX market. 
 
New York's stock markets opened the week higher, but European shares struggled to follow the sharp gains in Chinese equities.
 
Shanghai added 2.7% for the day and Hong Kong jumped 2.1% despite the weakest Chinese trade balance data for 13 months as Beijing relaxed a rule limiting private investors to just one stock brokerage to allow them up to twenty each.
 
"Besides low inflation and rising equity markets, the strong US Dollar has prevented the gold price from recovering," says Germany's Commerzbank in a note.
 
Shorter term, "Gold's downtrend channel was looking well established until Friday morning," says Jonathan Butler at Japanese conglomerate Mitsubishi, "when it broke out [and] recaptured the $1200 level on speculative buying."
 
Latest data from US regulator the CFTC meantime showed "short covering across ALL metals" in the week-ending last Tuesday by hedge funds and other speculative traders, says ICBC Standard Bank's London trading team in a note.
 
"Long liquidation has also been a theme, with only gold the exception."
 
Gold prices then ended last week "unchanged" notes London market maker Scotia Mocatta's New York team, saying in a technical analysis that "the weekly candle hints to some uncertainty, with the potential for consolidation around $1200.
 
"We await a material break of either $1180 or $1220...Weekly technical signals are broadly neutral."
 
Shanghai gold prices meantime ended Monday higher in Yuan terms, but premiums above London prices – which turned negative early last week – rose only to $1.20 per ounce, "confirming that physical demand remains weak," according to one Hong Kong trading desk, as the Chinese currency slipped to 4-week lows against the Dollar on the FX market.
 
"With Shanghai trading around flat with London interest should be muted," says Swiss refining and finance group MKS's Asian trading note.
 
"The slump in [China's] exports figure" – fully 15% down in March from February on today's data – "was mainly due to weak global demand," reckons one Shanghai strategist quoted by Reuters.
 
"The Dollar's appreciation against other currencies was also negative for China's exports," Nie Wen at Hwabao Trust goes on, because the Yuan is closely pegged to the US currency.
 
"More stimulus measures are needed in the future."
 
Trading in Shanghai's new international gold contract today slipped back below turnover in China's main domestic spot contract, reversing a pattern seen last week for the first time.

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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