Gold News

Gold Prices Rally 1% Off 3-Month Dollar Low on Fed Rates Talk, Rise vs. Sinking Euro as Stocks Tumble with Bond Yields on Jobs, Wholesale Data

GOLD PRICES touched their lowest level since November's 10% crash in London trade Tuesday, dropping as European stockmarkets lost 1.5% amid fresh rebukes to Athens from Germany and Brussels over Greece's attempt to renegotiate its bail-out loans.
 
Dollar gold prices then rallied 1.0% to trade back at $1167 per ounce – unchanged for the week so far – as US Treasury yields sank and US stockmarkets opened lower following weaker-than-expected data on US wholesale trade and new job openings.
 
"Inflation is contained, unemployment is declining...and the overall economy is steaming along," said outgoing Dallas Fed president Richard Fisher in a speech in Houston, Texas overnight.
 
"I would rather the FOMC raise interest rates early and gradually, than late and steeply."
 
"The headwind from government spending is abating," said Cleveland Fed president Loretta Mester in a separate speech Monday, noting that Washington's spending "began to rise again last year [while] the banking sector is regaining its health [and] we now also have a tailwind in the form of lower oil prices.
 
"If incoming economic information continues to support my forecast, I would be comfortable with liftoff [from zero interest rates] in the first half of this year."
 
Today's new US figures showed job openings reaching a 14-year high in January, but the JOLTS release missed analyst forecasts after last week's much stronger than expected non-farm payrolls data.
 
Wholesale trade across the US meantime fell more than 3% by value from December, the third monthly drop in succession.
 
US Treasury bond prices rose, pushing 10-year yields down to 2.13% from yesterday's new 2015 high of 2.24% per year.
 
"Our outlook for gold is fairly bearish at the moment," the Sydney Morning Herald quotes ANZ Bank analyst Daniel Hynes, forecasting a drop to new 5-year lows of US$1100 per ounce as the Dollar rises again.
 
Friday's monthly non-farm payroll data, which saw gold prices plunge last week, "[were] never a big driver of gold," reckons Swiss bank UBS analyst Jo Battershill, "but have become a strong driver of the gold price over the last 18 months."
 
Eurogroup finance chief Dijsselbloem meantime warned Athens that Greece "won't receive" further bail-out loans if it doesn't press ahead with privatizations and deregulation.
 
"Markets will also lose confidence," he said, according to the Reuters news-wire.
 
Euro gold prices rose to €1089 today – a new 20-month high when reached this January – as the single currency slid to fresh multi-year lows on the FX market.
 
Britain's Pound Sterling today broke above 7-year highs at €1.40, while the Dollar reached its highest value in 12 years at better than $1.08 per Euro.
 
Emerging-market currencies sank alongside the Euro, with Mexican Pesos extending Friday's drop – when stronger-than-expected US jobs data saw the Banco de Mexico spend $200m of its FX reserves to try and defend the currency – to hit the lowest Dollar level since the 1993 launch of the 'nuevo peso'.
 
Brazil's Real touched new 11-year lows amid analyst concerns that Rouseff's government will fail to implement 'austerity' to cut the public deficit.
 
Meantime in Turkey – the world's No.4 gold consumer nation – the Central Bank of Turkey today said it will boost banking liquidity by US$1.5 billion later this week.
 
Broad commodities index the Bloomberg CMCI lost 1.1% for the day.
 
Silver tracked gold prices, rallying from $15.63 per ounce to trade flat for 2015 to date.

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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