Gold News

US Jobs Data See Gold Prices Fall Ahead of Fed Minutes

GOLD PRICES reversed a $10 rise Wednesday lunchtime in London, falling back to near 1-week lows at $1220 as stronger-than-expected US data buoyed the Dollar ahead of the release of minutes from the Federal Reserve's "QE taper" vote last month.
 
A variable guide to official non-farms data, due Friday, today's report from payrolls services provider ADP said the US private sector added 238,000 jobs in December, beating both Nov. and consensus forecasts.
 
Asian stock markets closed higher but Europe slipped.
 
Gold prices for Eurozone investors fell back to €900 per ounce, a three-and-a-half year low when first breached in mid-December.
 
"A quiet session overnight," said one London broker's desk. "A noted lack of physical demand."
 
Wednesday's later release of minutes from the US Fed's last policy meeting of 2013 – when it finally tapered $10 billion from its $85bn-per-month of quantitative easing – "will [also] deter buyers from the market for the time being," it added.
 
"We may see a lower move in gold prices in the aftermath of the Fed minutes," one US brokerage analyst adds.
 
The only Fed voter to dissent from tapering last month, "I'm now comfortable with the current approach," said Boston Fed president Eric Rosengren late Tuesday.
 
"I wouldn't want to take any dramatic steps," he went on, but called a $10 billion monthly taper from the current $75bn total "appropriate."
 
Although Fed chairman Ben Bernanke discussed the central bank's thinking at length when announcing the taper, "the gold price is under pressure ahead of this evening's publication," says a note from Commerzbank's commodities analysts in Frankfurt.
 
Also "likely to have weighed on the gold price," says Commerzbank, was Tuesday's over-subscribed bond issue by Ireland, which last month exited the €67.5bn EU/IMF bailout programme of 2010, raising half its 2014 borrowing needs.
 
"[Gold price] fundamentals seem unfavorable over the next couple of years," says a new forecast from Moodys Investor Services, "as the global economy maintains forward momentum, governments unwind various stimulus programs, and the threat of inflation remains subdued in most major economies."
 
The research and rating agency now expects gold prices to average $1100 per ounce in 2014 "and beyond", down from the previous forecast of $1200.
 
Silver prices are also set to fall, says Moodys, down to an average $18 from their earlier $20 forecast.
 
The metal fell Wednesday to $19.45 per ounce following the US jobs data, unwinding the last of the New Year's 8.5% rise.
 
"[Today's Fed minutes] are unlikely to be bullish for precious metals," says Standard Bank's daily note.
 
Chinese consumer demand ahead of the New Year continued strong meantime, according to local press reports.
 
But gold prices on the Shanghai exchange closed lower, down 1.3% in Yuan and cutting the premium to global benchmarks to $14 from yesterday's six-month peak of $18 per ounce.

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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