Gold News

Gold Price Benchmark Erases December's 4.2% Gain, 'Just Not Needed' as US GDP Grows 5%, Iron Joins Oil & Currencies at 5-Year Lows vs. Dollar

GOLD PRICES held near 3-week lows in London on Tuesday after losing 2.2% in the 5 hours following yesterday's PM London Gold Fix in what dealers called "very thin trading conditions".
 
Turnover in Shanghai's main gold contract, in contrast, jumped overnight to the highest level since 10 December, when prices hit 7-week highs of $1238 per ounce. 
 
Recording a morning  Gold Fix in London of $1179.50 per ounce today, the world's benchmark gold price – confirmed Monday as a "relevant benchmark" for UK regulation, with abuse by traders a criminal offence from 1 April 2015 – erased the last of this month's earlier 4.2% rise against the Dollar.
 
New data today said the US economy grew 5% annualized in the third quarter, the fastest pace in a decade.
 
The US Dollar has this week hit new 5-year highs on its trade-weighted index against other major currencies.
 
"Active two-way trading interests as gold traded below $1191," says a note from Germany's Commerzbank.
 
"Gold finally broke out of the wedge it was forming," says Swiss refining group MKS's trading desk, pointing to previous "support" around $1190.
 
"Gold also breached technical [ie, chart] support 1180 on its move lower," says MKS.
 
"Skyrocketing equity markets, firm USD and weakening oil prices finally caught up with gold, triggering long liquidation and position squaring ahead of the Xmas and New Year break."
 
"The general theme," agrees a note from US brokerage INTL FCStone, "now seems to be one of a rising Dollar and buoyant equity markets, leaving commodities vulnerable."
 
"Emerging-market buying on dips," says London market maker HSBC's analyst James Steel, "is likely to moderate further potential gold price declines.
 
"[But] ongoing oil market weakness is a significant weight on bullion and may very well cap rallies."
 
Crude oil bounced 1.5% higher today after Monday's hard drop, with Brent crude edging above $60 per barrel – a new 5-year low when first reached a week ago.
 
Iron ore fell 1.6% however to the lowest since June 2009 as investment bank Goldman Sachs forecast the global surplus will double next year to 110 million tons.
 
The Russian Ruble meantime held firm around 55 to the Dollar after rallying 45% from last Tuesday's plunge to fresh record lows.
 
The parliament in neighboring Ukraine today voted to end the country's non-aligned status – a key and "provocative" step according to analysts in pursuing membership of Nato – only one day after Germany and France brokered new peace talks between Moscow and Kiev for Wednesday and Friday this week.
 
"Gold just has so much going against it," the Wall Street Journal quotes strategist Ira Epstein at futures clearing merchants the Linn Group.
 
"It is not an asset people should buy right now."
 
"Gold as an inflation hedge is unnecessary," Bloomberg quotes chief investment officer Atul Lele at the $5-billion Deltec International Group.
 
"Inflation in the US could rise, but nothing that should be a cause of worry."

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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