Gold News

Gold Prices 'Consolidating' vs Rising Dollar as US Jobs Surprise, Scrap Sales Grow

GOLD PRICES held firm against a rallying US Dollar in London on Wednesday, trading above $1230 per ounce as Western stock markets failed to extend a strong surge in Asian equities overnight.
 
After new data Tuesday said US manufacturing recovered a little in February from its worst showing since 2009, private-sector payroll figures from ADP Inc. reported a jump of 214,000 – well ahead of economists' consensus forecasts.
 
The US government's estimate of non-farm payrolls growth in February will be released Friday.
 
Commodities paused after the recent 30% jump from 13-year lows in crude oil, and silver prices also held flat below $14.90 per ounce, while major government bond prices retreated, nudging 10-year US Treasury yields near 1-month highs at 1.85%.
 
"If the world economy and financial system is indeed heading for the rocks," reckons London-based Capital Economics, "an extended period of looser monetary policy and strong demand for safe havens should boost the precious metal further."
 
The odds of a US Federal Reserve rate-rise to 0.75% at the mid-March meeting now stand below 1-in-50, according to futures trading, down from 1-in-6 a month ago.
 
"However, we suspect that a new factor – the return of inflation – will also be increasingly important [and] any correction in the gold price will be short-lived," the consultancy concludes, repeating its end-2016 forecast of $1250 per ounce.
 
Wholesale bullion trading "could continue to see some profit-taking and the market slip back," says a note from brokers Marex Spectron in London.
 
But "consolidation remains underway," counters a technical analysis of price charts from Canadian bank and London bullion market maker Scotiabank.
 
Consolidation should be seen "in a positive light," agrees the latest Bullion Weekly Technicals from German financial services group Commerzbank, repeating that February "saw the market break through the 2014-2016 downtrend at $1200...
 
"[Now] we are seeing the market hold sideways below $1263.50" – the early February high for Comex gold futures contracts.
 
Meantime in India – the world's largest consumer gold market – "most jewelry showrooms remained closed" on Wednesday reports Rediff, as the industry protested this week's new 2016 Budget tax hikes on gold imports and sales
 
"The proposed excise duty will lead to a drastic fall in business," says Surinder Kumar Jain, vice-president of the All India Sarafa Association, which had previously supported the BJP government's policy of trying to curb gold imports by offering deposit and bond schemes – schemes further favored with the exemption of capital gains tax in Monday's Budget.
 
"Scrap imports from Asia [to Italy and Swiss refiners] have boomed," says the latest gold note from precious-metals analysts Metals Focus, reporting that 2015's decline on falling prices has "all changed".
 
"Domestic volumes responded strongly to prices breaching €36 per gram" in late February say refining industry contacts, Metals Focus reports, pointing to €1120 per ounce – a price last seen by European scrap dealers and refiners in April last year when gold failed to recover its sudden spike of last New Year 2015.

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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