Gold Price "Remarkably Stable" in Face of Crude Oil Crash, Stock Market Drop, New Euro Crisis and 8-Year High in US Consumer Confidence
Friday, 12/12/2014 15:39
GOLD PRICE gains of 2.9% for the week were trimmed in London trade Friday, with the metal slipping through $1220 per ounce after stronger-than-forecast US consumer confidence data.
The Reuters/Michigan index rose to its highest level since January 2007 – before the financial crisis hit world credit markets – with inflation expectations also turning higher.
But despite the US Federal Reserve voting on interest-rate policy next week, the US Dollar was little moved on the FX market as Western stock markets fell sharply against a fresh plunge to new 5-year lows in crude oil, now trading below $60 per barrel on the WTI benchmark.
The Euro continued to trade within half-a-cent of this month's Dollar highs at $1.25.
Euro gold prices dropped below €980 per ounce, cutting this week's gain to just 0.8%.
"In the face of this week's growing uncertainty, the gold price has been remarkably stationary," says a note from Deutsche Bank, "even versus the Euro
"Market protagonists appear unwilling to use gold as a hedge against an ECB asset-purchase program, a sovereign default, or a Eurozone break-up, at least not if this involves holding a long position over the year-end."
"Rather looks," says a London trading desk, "as if the year will end in a blaze of volatility rather than with a whimper," pointing to "continued geopolitical tensions, oil price destruction, Dollar strength and – very possibly – overstretched positioning in many assets.
"All this could be wound up another notch if the Fed tightens its statement next Wednesday."
For now, says a technical trading note, "Resistance is at $1236, the [downwards] trendline from Oct 2012."
"We maintain a focus on the 100-day moving average," says bullion bank Scotia Mocatta's technical team, "an important level of near term resistance given the recent attempt and failure to close above it."
"Like all commodities," says UK finance professionals site
CityWire, quoting Michael Turner of the $435 million Aberdeen Multi-Asset fund, "gold can be volatile.
"But if deflation prevails in Europe, bringing into question the soundness of the Euro once again, then
gold may represent an appealing store of value.
"Over the long term, it has proved a useful diversifying component of the portfolio, particularly in times of market stress."
Silver demand meantime will outstrip new supply by some 11 million ounces (340 tonnes) in 2015, according to a new forecast from global bank and London market-maker HSBC.
In an annual market of some 1 billion ounces (31,100 tonnes), this year will have seen a surplus HSBC says of some 3 million ounces (93 tonnes).
Silver today tracked gold prices, moving sideways above $17 per ounce to head for a 4.7% weekly gain.
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