Gold News

Gold Price $1200 "Would Cost Another 100 Tonnes" as ETF Holdings Hit 5-Year Low

GOLD PRICE gains of $15 per ounce from Monday were erased this morning in Asia and London, as the US Dollar rose and world stock markets held flat overall.
 
Trading back at last week's closing level of $1238 per ounce, the gold price tracked broader commodity markets, where Brent crude oil retreated to $109 per barrel.
 
Gold prices for UK investors edged up to £761 per ounce as the British Pound fell to 3-week lows following the weakest reading of Consumer Price Inflation in four years at 2.1% per year.
 
US inflation data were due with the start of Tuesday's New York trading, with consensus forecasts for a 3-month high of 1.3% per year.
 
Maintaining its inflation target at 2.0%, the Federal Reserve today starts a two-day meeting to decide US monetary policy for the next 6 weeks, including a possible "taper" of $85 billion in monthly asset purchases.
 
"The bullion market is likely to continue to mark time ahead of the FOMC statement," says a note on the gold price from global bank and London bullion market-maker HSBC.
 
"However, post the FOMC meeting, we are more favorable...Speculators still hold significant short positions. The approaching year end may lead to a covering of spec shorts, which is gold-price supportive in our view."
 
ETF trust fund holdings of gold have dropped 40% by value this year to $119 billion, says UK-based Barclays Capital.
 
The giant SPDR Gold Trust, the world's largest gold ETF, shed another 1% of its bullion holdings yesterday to reach 818 tonnes, the lowest level since January 2009.
 
Losing some 800 tonnes by weight in 2013, a further 100 tonnes of gold ETF holdings would become cash negative for investors who bought during the bull market at a price below $1200, BarCap adds.
 
"Fed tapering and a general reduction in liquidity are the big game-changers in these markets," BarCap's commodities team says. "The risk is for further price downside ahead."

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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