Gold News

Gold Prices Struggle as ECB's Draghi Joins 'Dovish' Turn from Fed and BoJ, UK Gold ETFs Shrink as Brexit Row Rolls On

GOLD PRICES struggled below this week's new March highs in London trade Wednesday as global stock markets rose on hints of continued monetary stimulus from the European Central Bank.
 
Gold priced in the 19-nation Euro held a small gain for the week so far but it fell below last Friday's close for US and UK investors, trading down to $1310 and £990 per ounce respectively.
 
Asian stock markets rose outside Japan, which edged back after Tuesday's rally amid talk of new central-bank stimulus in Tokyo.
 
Eurozone equities also rose but the UK stock market held flat as the British Pound rose ahead of today's key "indicative votes" over Brexit in the UK Parliament
 
Following dovish comments from both US Fed and Bank of Japan policymakers over the last week, "The ECB will adopt all the monetary policy actions that are necessary and proportionate to achieve its objective," said its president Mario Draghi today in a speech at the central bank's Frankfurt HQ.
 
Widely assumed to mean the ECB will delay any interest-rate rises or sales from its QE bond-buying program, "We are not short of instruments to deliver on our mandate," Draghi added, an echo of his famous "whatever it takes" comments during the 2010-2013 Eurozone debt crisis.
 
Gold priced in the Euro currency rose Wednesday to touch €1170 per ounce – a 22-month high when reached in February – while German, French, Italian and other Eurozone government bond prices also rose again.
 
Pushing yields further below zero, 10-year German Bunds now offer to cost new buyers 7 cents per year for every €100 invested.
 
Chart of 10-year German Bund yields vs. Euro gold price. Source: St.Louis Fed
 
"Given that the market is increasingly pricing in a US rate cut this year," says a note from Canadian brokerage TD Securities, "gold could well move into a higher trading range sooner than expected.
 
"Indeed, we suspect that current prices will prompt aggressive [speculative] buying along with additional spec length" in the futures and options market.
 
The giant SPDR Gold Trust (NYSEArca: GLD) – the world's largest gold-backed ETF – yesterday grew by 0.4%, taking the New York-listed fund back to its size at the end of February after shrinking by 2.2% over the first 2 trading days of this month.
 
Despite the UK's ongoing policial crisis however, the 2 largest such UK-listed gold ETFs have shrunk by 2.1% so far this month.
 
UK lawmakers were set today to seek "a way forward" on Brexit – initially scheduled to happen this Friday – by voting on a shortlist from 17 alternatives including 'no deal', asking the EU for a customs union, or even cancelling Brexit entirely.
Prime Minister Theresa May was again rumored to be preparing a timetable for quitting as Conservative leader in exchange for pro-Brexit members of her party agreeing to back her Withdrawal Agreement with the European Union, already twice rejected out of hand by Parliament.
 
Pro-Brexit former Foreign Secretary Boris Johnson today joined Brexit-group the ERG's chief Jacob Rees Mogg in saying he "could" back May's deal at the third time of asking, provided the Conservative Party's coalition partners from Northern Ireland's DUP also agree.
 
The opposition Labour Party will order its MPs to back an indicative vote for a second referendum, contradicting what senior figure Barry Gardiner told the BBC at breakfast time.
 
May's Government yesterday responded to a petition with 5.8 million signatures – far above the 100,000 threshold for needing a debate in Parliament – that it "will not revoke Article 50 [but instead] honour the result of the 2016 referendum and work with Parliament to deliver a deal that ensures we leave the European Union."
 
Over in China today, Shanghai gold prices held a solid $14 premium to London quotes, more than 55% greater than the typical incentive for new bullion imports into the world's No.1 gold consumer nation.
 
"Jewelry sales will most likely be weak this quarter," reckons German-headquartered refining group Heraeus in a note, saying that despite "some limited stimulus measures in an effort to boost economic activity" from Beijing's government, "the price has rallied further during 2019" while China's manufacturing sector "has continued to decline", hurting household incomes overall.
 
Gold jewelry consumption in No.5 market Turkey also faces "a mixed outlook for the coming months" says the latest analysis from specialist consultancy Metals Focus, reporting from last week's Istanbul Jewelry Show.
 
With Turkish households increasingly moving away from high-purity items as gold prices have set a run of new all-time Lira highs in recent years, "Demand for high labour 14-carat gold jewelery has [now] suffered as consumers cut back spending on non-essential purchases," the analysts say.

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.

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News.

Follow Us

Facebook Youtube Twitter LinkedIn

 

 

Market Fundamentals