Gold News

Gold Price Snaps 3rd Longest Gains Since 1971 as Everything Else Rises with Bond Yields

GOLD PRICES headed for the first quarterly loss in 10 in London on Wednesday, losing 10.8% in Dollar terms by end-March from the end of December after industrial commodities, global stock markets, the US currency and long-term interest rates made a steep rise in 2021 so far.
 
Crude oil today edged back towards $60 per barrel but held on track for its third quarterly gain in a row after making its steepest fall on record during Q1 2020's Covid Crash, down over 66% for the quarter and turning negative at one point.
 
Despite slipping Wednesday, the MSCI World Index of developed-economy equities has now risen 4.3% from New Year's Eve, setting fresh all-time highs in mid-February.
 
The Dollar has meantime rallied 3.5% from end-December's near 3-year lows against the world's other major currencies.
 
Ten-year US Treasury yields today reached 1.72%, some 80 basis points above New Year's Eve to mark the 2nd steepest quarterly rise of the last decade in Washington's borrowing costs.
 
Gold's $200 price drop took it back down overnight to start-March's 9-month low of $1678 per ounce, snappinbg a run of 9 consecutive quarterly gains, the 3rd longest since the metal was unpegged from the Dollar 50 years ago this summer.
 
Chart of end-quarter change in 10-year US Treasury yields (green, left) versus gold prices. Source: St.Louis Fed
 
Gold's No.1 consumer nation China today saw wholesale prices on the Shanghai Gold Exchange retreat to the lowest since March last year at ¥356 per gram.
 
That still put gold landed in China at a $6 per ounce premium to London – the metal's key trading and storage hub – offering a solid incentive to new imports after the record discounts of 2020's Covid Crisis showed a glut of supply over demand.
 
Allowing for India's heavy but reduced gold import duties, wholesale prices in the No.2 consumer nation have now shown a premium to London quotes every week this year according to data from Reuters.
 
Meantime in the stock market, London's largest IPO in 10 years today sank over 30% on its debut.
 
Shares in meal-ordering app Deliveroo (LON: ROO) fell to £2.71 from the £3.90 initial offer price – itself 15% below the company's upper target but valuing the business at £7.6 billion, the largest market-cap for a new London stock since commodity-trading house Glencore (LON: GLEN) floated in summer 2011.
 
Founded in 2013, and now billing itself as "the future of food", Deliveroo saw sales grow 64.3% in 2020 to £4.1bn with underlying losses down 29.5% for the year to £224m.
 
Some 70,000 private investors participated in the float, many invited by an email sent to their personal meal-ordering account claiming to be a "service" message.
 
Shares in Glencore – now rallying 140% above last March's Covid commodity crash – today traded at £2.86 per share, barely half their initial offer price of a decade ago.
 
The UK gold price in Pounds per ounce meantime flat-lined above £1220, a record high when first reached in August 2019 and 22.4% below last summer's new peak.
 
While the Bank of England's base rate remains at 0.10%, the yield on 10-year Gilts today held above 0.83% per annum, the highest such government borrowing cost for the UK government since New Year 2020 but a record low when first reached in the aftermath of 2016's Brexit referendum shock.
 
Euro gold prices also held flat today, trading below €1440 per ounce as Eurozone government bond yields edged back from their recent surge to multi-month highs.

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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