Gold News

Weak China Data Sees Gold Prices Sink 2.7% on Anniversary of Worst Crash in 3 Decades

GOLD PRICES fell hard Tuesday lunchtime in London, dropping 2.7% on the 1st anniversary of the worst gold price crash in 30 years as new data from China showed a marked slowdown in money-supply growth.
 
15 April 2013 saw gold prices drop nearly 15% at one point, ending more than 9% lower at $1351 for the worst day since 1983 and the fifth sharpest loss since prices were floated in 1968. 
 
April 2013's crash in gold prices meant "Chinese consumers [brought] forward jewelry and bar purchases," says a new report on China's gold demand from market-development organization the World Gold Council.
 
Despite forecasting 20% growth by 2017, "That may limit growth in demand in 2014," says the report, China's gold market: progress & prospects.
 
Investment bank Goldman Sachs – which called for a sharp drop in prices last April – last week repeated its call of $1050 by year-end.
 
A new Reuters survey Tuesday put the consensus gold price forecast amongst 28 analysts and consultants at $1,254 on average in the last three months of 2014.
 
Reversing all of last week's gains on Tuesday, gold prices had "found stiff resistance" Monday above $1330, says French investment and London bullion bank Societe Generale.
 
The metal's charts then "formed a daily bearish [pattern] and gold is poised for a further correction."
 
"The market stretched as far as $1331 before it capitulated and sold off," agrees technical analyst Karen Jones at Germany's Commerzbank.
 
"Near-term risk remains on the downside."
 
"Overall sentiment [in metals] is weak," says a note from Canada's RBC commodity team, quoted by Bloomberg today as nickel prices fell at the fastest pace since October, "because China's economy is still a worry."
 
"Compared to macro-economic indicators," China's official Xinhua news agency quotes head statistician Sheng Songcheng, commenting on the slowest money-supply growth in more than a decade at 12.1% annually, "the current M2 growth rate has stayed at normal levels.
 
"Liquidity conditions are still ample to support the development of the real economy."
 
Gold prices in Shanghai today fell 1.1%, down to a 3-session low in the Yuan but cutting the discount to London settlement to 60¢ per ounce.
 
Now at a discount for 7 weeks running, gold bullion in Shanghai typically trades at a premium to international quotes, hitting $50 per ounce and more above London prices on spring 2013's crash.
 
Shanghai equities ended Tuesday sharply lower, but European stock markets reversed earlier losses as New York opened.
 
The Euro currency fell with gold prices, dropping near 1-week lows to the Dollar.
 
New US data showed consumer-price inflation rising to 1.5% per year, in line with analyst forecasts.

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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