Gold News

Gold Prices 'Struggle to Recover' as China Demand Ebbs Before Lunar New Year, 'Geopolitics to Beat Fundamentals' in 2015

GOLD PRICES slipped in London trade on Tuesday, giving back an earlier 1% rise from last week's finish as Eurozone stock markets rose and commodities fell.
 
Major government bond prices retreated, nudging interest rates higher.
 
Ten-year US Treasury yields crept higher to reach 2.0% – an 18-month low when hit in January – for the first time in a month.
 
The overnight lull in gold prices meant "Chinese demand came right on cue at the open once again," says one Asian dealing desk, "although not as strong as Monday."
 
"The recent $30-decline in gold prices," says a note from Swiss investment and London bullion bank UBS, "[is] perhaps encouraging some last-minute buying out of China for the Lunar New Year festivities."
 
But more broadly, "India and China are not buying right now, our books are not full," said Frederic Panizzuti, CEO in Dubai for Swiss refiner MKS at the annual Richcomm Commodities Outlook on Sunday.
 
"We expect to see some buying from March and April onwards," said Panizzuti – winner in 2014 of the London Bullion Market Association's gold price forecasting contest.
 
Crucially for 2015 prices, he added, "We have put fundamentals aside in our gold outlook.
 
"[Because] geopolitics, the perception of risk and even emotional risk from investors, are the main drivers this year."
 
Panizzutti is the second most bullish gold forecasters in the new 2015 LBMA survey, but only with an annual average prediction of $1292 per ounce – a mere 2% rise from last year.
 
Investment gold holdings needed to back shares in the largest exchange-traded gold fund, the SPDR Gold Trust (NYSEArca:GLD), were unchanged Monday at 4-month highs, some 10% larger from the New Year's half-decade low.
 
Silver bullion held to back shares in the iShares Silver Trust (NYSEArca:SLV) was also unchanged near 1-year lows, down almost 9% from November's three-year high.
 
"With China trade likely to be quiet into the Lunar New Year," says a note from Standard Chartered – now a market-making member of the London bullion market – "gold may struggle to recover lost ground this week."
 
Friday's US jobs data, StanChart says, added "to views that the Fed tightening cycle could now start earlier than current consensus...[outweighing] the recent focus on currency volatility, Euro-area concerns, rate cuts and extra QE outside the US."
 
Gold priced in the Dollar today tracked back down to $1234 per ounce, unchanged from last Friday's 4-week closing low.
 
The Euro meantime flicked around $1.13 to the US currency, a 13-year low when hit amid last month's Swiss peg and Eurozone quantitative easing news.
 
That held Euro gold prices at €1095 per ounce, some 6% below late-January's 21-month high of two week's ago.

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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