Gold News

Gold Price Hits 29-Month Low Vs. 'Safe Haven' Dollar as ETFs Pause Outflows

GOLD BULLION bounced $10 from a fresh 29-month low in London on Friday, heading for a 2.7% weekly drop after falling yesterday through its post-Covid floor in US Dollar terms even as gold-backed ETF snapped a run of heavy outflows.
Trading at $1667 per ounce after breaking below $1680 on Thursday for the first time since April 2020, gold bullion headed for its lowest Friday finish in 6 weeks in UK Pound terms at £1460.
Euro gold prices headed for their lowest weekly close since February at €1670.
Silver held firmer but also slipped, erasing almost all this week's prior 6.9% jump to trade back at $19.07 per ounce.
Bond prices also fell yet again, driving 10-year borrowing costs for the US, UK and most Eurozone governments more than 2 percentage points higher from this time in 2021.
European equities dropped within 3% of mid-June's 15-month low on the EuroStoxx 600 index, while so-called crypto currencies Bitcoin and Ether showed 8.8% and 16.5% weekly losses against the Dollar.
Crude oil rallied as German authorities seized control of 3 refineries owned by Russia's Rosneft ahead of next year's embargo on energy imports from the Ukraine invader, but European natural gas prices sank as much as 10% as commodity prices fell again on the S&P GSCI basket after sinking 3.2% on Thursday.
"Data [yesterday] showed demand for workers in the US remains strong," says Daniel Hynes at Australasian bank ANZ, pointing to lower-than-expected jobless benefit claims.
"Retail sales were also reasonable...likely to keep the Fed on the tightening cycle for the foreseeable future."
Added together, that means "Rising geopolitical and economic risks are doing little to entice safe haven buying" in gold bullion and related products, Hynes says, "with the US Dollar remaining the asset of choice."
5-year chart of gold priced in US Dollars. Source: BullionVault
Thursday's steep drop in bullion prices snapped a 1-month trend of investor outflows from the giant GLD gold-backed ETF, with the trust ending last night needing an additional 0.5 tonnes of bullion.
With trading volume in GLD shares up more than 120% from the previous 3-month daily average, that small inflow raised the ETF's backing from 960 tonnes, the smallest since March 2020.
No.2 gold ETF the IAU product was also left almost unchanged in size by yesterday's break in gold prices below $1680, but with trading volume only 15% above its recent average.
Trading in derivatives exchange the CME's Comex gold contracts meantime jumped 58% from Wednesday's level, reaching the heaviest volume in 2 months.
CME trading volumes in silver, platinum and palladium fell in contrast.
With global gold prices 2.1% lower in Dollar terms this morning, volumes in Shanghai's most active gold contract jumped almost 45% on Friday from last month's average, hitting more than 20 tonnes.
But that only took Au(T+D) volume a little above July's daily average, and today's activity lagged the 2021 average by 15%.
Shanghai premiums over London quotes still rose however, with gold bullion landed in China – the precious metal's No.1 consumer market – offering importers an incentive of $38 per ounce, a fresh 6-year high, even as the domestic Yuan price of gold fell to an 8-session low and the Chinese currency weakened to its lowest US Dollar exchange rate since 2020.
With zero-Covid lockdowns continuing to hit consumer spending in China, "Grass roots buying is relatively thin at the moment," said international brokerage StoneX's Rhona O'Connell last month, "so there may be some institutional interest involved" in boosting China's reported gold bullion imports through Hong Kong to a 9-month high in July.
Base metals credit lines in China have meantime been frozen or cut by leading commodity-market lenders J.P.Morgan and ICBC Standard, Bloomberg said overnight, after copper trader Maike Metals asked the government for financial aid and reports continued of "missing collateral" for other deals.
Nickel prices on Friday fell 1.9% in Dollar terms on Thursday, trading almost 6.0% below Monday's 10-week high at less than half of March's spike to record highs amid the chaotic short-covering by leading Chinese miner Tsingshan.
Copper meantime slipped further on Friday from 2-week highs, holding 8.0% above mid-July's 20-month lows.
World No.1 copper deposit Escondido faces strike action over what its operator, owned by giant global commodities producer BHP, calls a "displacement of material" but the workers' union calls a sinkhole.
"Silver still maintains a large top below $21.39," says technical analysis from Swiss bank Credit Suisse, forecasting "further downside" and a drop towards chart support around $15.50 per ounce.


Adrian Ash

Adrian Ash, BullionVault Gold News

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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