Gold News

Gold Price Erases 2% Spike vs. Falling Dollar as Oil & Russian Ruble Crash, "No Change Likely" to US Fed's Zero-Rate Vow

GOLD PRICES spiked against a fast-falling US Dollar on Tuesday in London, briefly surging back above $1200 per ounce as crude oil sank, the Russian Ruble fell 20% to new all-time lows, and traders slashed their bets on any change from the Federal Reserve at its policy meeting tomorrow.
 
Monday had seen the Dollar price record gold's "sharpest fall in a day" since 2 December 2013 according to Reuters.
 
As Brent crude oil then joined US contracts below $60 per barrel on Tuesday for the first time in 5 years – and silver fell nearly 9% below last week's finish – gold jumped 2.1% inside 1 hour, briefly touching Friday's 7-week closing high, only to give it all back at $1193 by the end of London business.
 
The Moscow stock market meantime dropped more than 17% for the day as the Ruble sank from 60 to 80 per Dollar.
 
Already hiking interest rates today from 10.5% to 17% but to no effect, the Central Bank of Russia called the situation "critical" and vowed "further action".
 
Norway's Krone also sank as oil fell, dropping 5% to the Dollar, while Bloomberg's GCC index of Middle Eastern and North African stock markets also fell 5%.
 
Outside the so-called "commodity currencies" however, the Dollar itself fell hard ahead of Wednesday's decision from the US Federal Reserve, giving back its last month of gains vs. both the Euro and Yen.
 
"We have a feeling the Fed will not be removing the key phrase 'a considerable period' from its communique," says a note from US brokers INTL FCStone, pointing to the US central bank's continued promise of zero interest rates.
 
"If correct, we should see the Dollar weaken from here...So we likely would want to stay long gold going into [Wednesday's] release, perilous as the short-term looks for the moment."
 
Ten-year US Treasury yields fell hard near two-month lows as bond prices rose Tuesday.
 
The Euro today jumped to its best level against the US currency since mid-November, adding 3 cents $1.2550 from last week's new 2-year lows.
 
That capped gold in Euro terms below €970 per ounce.
 
The Japanese Yen rose 5% from early December's fresh 7-year lows.
 
Yen gold prices held Tuesday below ¥4,540 per gram, some 4.3% beneath last Wednesday's 19-month high.
 
"Both Tokyo and Shanghai took advantage [overnight] of the decreased gold price," says one Asian trading desk, "and we saw modest bids in the market from both centers."
 
Premiums on Shanghai's main gold contract had earlier fallen 1.7% in Yuan terms Tuesday. Converted to Dollars, however, newer contracts for high-grade kilobars in the city's international "free trade zone" rose to $3.70 per ounce above London prices, well above the average level since September's launch.

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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