Gold Prices Hit by FX Volatility as World Equities Hit 4-Month Low, Big ETF Selling "Largely Done"
Tuesday, 2/04/2014 13:53
GOLD PRICED in US Dollars fell back to $1250 per ounce Tuesday lunchtime in London, giving back the last of yesterday's swift 1.3% gain, made after weaker-than-expected US manufacturing data.
Priced in British Pounds, gold held onto half of Monday's rise, trading at £766 per ounce despite data showing the fastest surge in UK construction activity since mid-2007, one month before the banking run on mortgage-lender Northern Rock.
Western stock markets fell for a fifth day running, while Japan's Nikkei slumped 4%, pulling the MSCI World Index down to near 4-month lows as the sell-off in emerging markets also continued.
Formerly favoring "gold in Yen", Dennis Gartman of the eponymous trading Letter today wrote that "our interest in gold in Euro terms is trumping [the Yen play]...for the first time in more than a year and a half."
The worst-performing choice for January, gold priced in Japanese Yen rose only 0.9% last month against a 6.0% rise in Euro terms.
Gold priced in Turkish Lira gained 9.8%. Priced in Brazilian Real gold rose 11.2%.
The Yen today touched 10-week highs against the Dollar and Euro, driving the gold price for Japanese investors down 3.5% from mid-January's 2-month high.
"Gold in Euro terms seems to be trying to move upward through resistance at €930 per ounce," says Gartman, adding that "what had been resistance should now be support."
Gold priced in Euros dropped to €925 per ounce Tuesday morning, trading some 1.3% below yesterday's new 11-week high.
Looking at technical charts of the gold price in Dollars, "Gold [last week] temporarily breached the down sloping channel resistance" from its August 2013 highs, notes French investment bank SocGen.
That "rebound bears the characteristics of a corrective" move within a longer-term drop, the note concludes.
But the "slowdown in the pace of selling from the largest ETF," says a note from Swiss bank UBS, "does fit in with the view that much of the unwinding in this space has already taken place."
Gold bullion holdings vaulted to back shares in the giant SPDR Gold Trust ETF (ticker: GLD) ended Monday unchanged at 793 tonnes, down 40% by weight from the start of Feb. 2013 and down 45% by value.
The bulk of GLD investment, says UBS strategist Edel Tully, was made either above $1200 or between $800-1000 per ounce. Meaning that would-be sellers are either waiting for a rise to break-even, or need a further price drop to start losing money.
"Chunky liquidations yesterday [meantime] mostly came from the Sprott Physical Gold fund," says UBS, and "more than offset recent gains and helped cap the market in spite of the weaker US ISM [manufacturing] print."
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