Gold News

Gold Price Jumps 1.8% to Break $1200, Euro Price at 8-Week High as Shanghai's International Gold Volume Leaps to Record

GOLD PRICES jumped back above $1200 per ounce for Dollar investors Wednesday afternoon in London, adding 1.8% from the day's low as Euro prices hit 8-week highs after US jobs data came in well below consensus forecasts.
 
The private-sector ADP report – a precursor to Friday's official Bureau of Labor Statistics' estimate of non-farm payrolls – said net hiring totaled only 189,000 last month, badly missing the Street's 225,000 expectation.
 
Data for both US construction spending and manufacturing activity then missed forecasts as well.
 
Longer-term interest rates fell, with 10-year US Treasury yields hitting the lowest level since early February at 1.86%.
 
New York's stock markets opened the day lower, while European shares followed Asia in rising towards the close.
 
"Given what we know today," said Richmond Fed president Jeffrey Lacker in a speech Tuesday, "a strong case can be made that the federal funds rate should be higher than it is now.
 
"Unless incoming economic reports diverge substantially from projections, the case for raising rates will remain strong at the June meeting."
 
But pushing back its forecast for a US rate rise from the current 0%, "A June rate hike would have exposed a weak gold price floor," says London market maker and LBMA Gold Price participant Barclays Bank, "whereas in September, physical demand tends to strengthen in light of seasonal buying in India."
 
A fall hike by the Fed should see physical gold demand from Asia help "buffer prices," Barclays concludes, but higher US interest rates will still "likely to lead to disinvestment."
 
"General theme continues," said a trading note from Standard Bank's London office earlier – "oversupplied commodities markets triggering reduction in 'diversification' and outright investments; and overall increase in shorts vs long liquidation."
 
But "following yesterday's sell off, China was back as a buyer today," says an Asian trading note from Swiss refining and finance group MKS. 
 
China's main wholesale gold price held $2.40 per ounce above comparable quotes for London settlement, some 90 cents below the average incentive offered to importers so far in 2015.
 
Trading volume in Shanghai's main domestic gold contract totaled only 60% of the last 6 months' average.
 
But trading in the international board's main contract – the iAu9999 contract launched last summer for foreign institutions to trade Shanghai-stored gold using the Yuan currency – jumped almost to the same level, rising from the last 5 weeks' average of 28% to equal 96% of the main bourse's contract volume, just shy of Monday's new record high in Yuan terms.
 
After waiving storage and dealing fees for international banks using the iSGE board for the first 6 months of this year, the "authorities continue to encourage trading by foreign institutions" in the new contracts, said Metals Focus director Nikos Kavalis at yesterday's London launch of the consultancy's 2015 gold yearbook, adding that foreign players will no longer have to transfer metal to the main domestic bourse.
 
Gold imports to China, however, made only a "sluggish start" to 2015 on Metals Focus' data, with the consultancy estimating the lowest Q1 inflows since 2012, down by more than 25% from the first 3 months of 2014.
 
Wednesday's weak US data meantime saw the Dollar little changed on the FX market, trading near a 1-week high to the Euro.
 
That let the gold price for Eurozone investors jump above €1115 per ounce, its highest level since 5th February.

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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