Gold News

Gold Prices Drop Near $1300, Seen "Struggling" as US Rates Slip After Data, Options Expire

GOLD PRICES fell to their lowest level since 13 February in London trade Wednesday, diving to $1302 per ounce after stronger-than-expected US economic data.
 
Annual growth in durable goods orders was more than twice Wall Street forecasts for Feb. at 2.2%, led by the sharpest rise in US automobile demand in a year.
 
The US services sector as a whole was seen rebounding sharply on the Markit PMI index, despite a slowdown for new business, plus a continued lull in new hiring.
 
Gold prices "[are] seeing light support," says the New York office of German refinery group Heraeus, "but the overall sentiment is bearish amid expectations of rising rates."
 
"We continue to believe that gold prices will struggle," says today's note from Standard Bank's commodities analysts, also pointing to "weak demand and rising real interest rates in the US."
 
US bond yields slipped Wednesday however, even as the US Dollar rose versus the Euro ahead and after the new data.
 
Ten-year US interest rates edged down to 2.71%, sharply below the New Year's level of 3.04% when gold prices again hit last June's 3-year low of $1182 per ounce.
 
US rate-rises are " state, not date, contingent," said St.Louis Federal Reserve president James Bullard in a speech Tuesday night, qualifying last week's comments from new Fed chair Janet Yellen that zero rates – now in place for more than 5 years – could end 6 months after the current QE tapering is complete.
 
Back in gold prices, "The [precious metals] markets are quiet, physical demand is fairly non existent and business is pretty scarce at these levels," said London broker Marex Spectron in a note.
 
But with April gold options due to expire Wednesday on the US Comex futures market, "[Gold prices] often have an uncanny knack on expiry days of heading to the main strike," Marex's David Govett told Reuters.
 
Data showed April options interest was heaviest in $1290 and $1300 puts, giving the bearers the right to sell gold futures at that price – a right only profitable if prices ended Wednesday below those levels.
 
Silver meantime followed gold prices lower, hitting near 7-week lows beneath $19.80 per ounce.

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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