Gold News

Gold Prices Slip from 1-Month High, "Underwhelming" After Weak US Jobs Data

GOLD PRICES retreated from a 1-month high at $1254 per ounce Monday morning in London, easing back but retaining Friday's jump following weak US jobs data as world stock markets held flat with commodity prices.
 
Silver prices hit 1-week highs above $20.35 per ounce before also edging just below last week's finishing level.
 
"Considering the sheer surprise of [Friday's US jobs] data," says Swiss investment and London bullion bank UBS, the gold price "reaction was very underwhelming.
 
"The biggest decider of gold's fate this year rests with market expectations of Fed policy," the note explains. "So a weak employment report should have sparked a greater gold reaction. And especially so, given the degree of shorts in the market."
 
Latest data from the US futures and options market show hedge fund traders raising their bullish betting and cutting their bearish betting on gold in the week to last Tuesday.
 
The speculative "net long" position rose 16% overall to a 7-week high equal to 212 tonnes of gold. But that was barely one-third the size of 12 months earlier thanks to near decade-high levels of short selling contracts.
 
The last time that speculative players in US futures and options held a net bullish position above 200 tonnes, the gold price was $1275 per ounce.
 
Gold ETF holdings meantime slipped 0.4%, taking the total of bullion held to back shares in the Western financial markets' largest gold trust funds to a new 5-year low beneath 1,840 tonnes.
 
"I think ETFs will still be on the selling side," said Eugen Weinberg, head of commodities research at Germany's Commerzbank, to Bloomberg overnight.
 
"Normalization [of economic growth and financial markets] means you don't have the need for a safe haven. Interest rates are rising, nominal as well as real, and the equity markets are rising."
 
"Gold does best during times of economic turmoil," agrees Edward Meir, an independent consultant, writing in a monthly report for US brokerage INTL FCStone, "and indications are that we will likely avoid any drama going into 2014.
 
"Most importantly, the Eurozone seems to have stabilized immeasurably."
 
Ireland last week returned to the bond market for the first time since its bail-out crisis of 2010, whilst Greek bond yields also fell to 4-year lows.
 
Italy today sold more than €8 billion ($11bn) of new 3-year debt at a record-low interest rate of 1.51%.
 
"Gold may take a back seat [for investors] for now until more is known about how policymakers plan to tackle the debt mountain," says ScotiaBank's new Metal Matters for January.
 
Looking at 2014's rally in gold prices to date, "Given the dominant downward trend and continued ETF redemptions," says Scotia, "the current rebound may just be another counter trend move with some start-of-year investment buying/positioning."
 
Gold prices on the Shanghai Gold Exchange meantime rose 1.4% on strong volume Monday, but the premium to London settlement retreated further from last week's 6-month highs to reach $14 per ounce.
 
Since deregulation of gold trading and investment began a decade ago, the Chinese New Year – coming in 2014 on 31 January – has marked a peak season for household demand.

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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