Gold News

Fed & BoJ Indecision See Gold Prices Jump, Yen Leaps as Dollar Falls with Stocks

GOLD PRICES touched a 1-week high Thursday lunchtime in London, reaching $1259 per ounce as the Dollar fell with world stockmarkets as the Bank of Japan followed yesterday's "no change" decision from the US Fed by also voting to maintain current policy, rather than increase stimulus.
 
Tokyo's Nikkei index sank 3.6% by the close, while European equities dropped over 1% after the Tokyo central bank held QE money creation at a record pace of $740 billion per year, with deposit interest rates for commercial banks held at minus 0.1%.
 
Gaining 2.2% from last week's finish against the Dollar, gold rose against all major currencies barring the Japanese Yen, which shot to 1-month highs on the FX market following the Bank of Japan's announcement.
 
New data meantime showed Japanese household spending sank 5.3% per year in March, while consumer prices fell harder than forecast, deflating by 0.3% excluding fresh food.
 
"The market had clearly worked itself into a frenzy of expectations," says Swiss bank Credit Suisse's head of equity sales in Tokyo, "demanding that the BoJ take action" against slowing growth and lower inflation.
 
"In retrospect that looks like a misguided view."
 
Silver also recovered its brief drop today from before Wednesday's Federal Reserve statement, rising back to $17.40 per ounce – a fresh 11-month high when hit last week.
 
Gold has now risen 20% since the Fed finally raised its key interest rate after 7 years at zero in December last year. Silver has gained 27%.
 
"The Dollar is still subdued," says Japanese conglomerate Mitsubishi's analyst Jonathan Butler, "and falling US Treasury yields similarly are giving some upside to gold."
 
"Resistance comes in at $1282.50," says a technical analysis from Canada-based Scotiabank's New York office, "and only a move above [that] March 11th high would return [gold] to the bull rally that began in December."
 
Overnight in Shanghai – where investors in failed $5 billion asset-manager Zhongjin Capital have begun protesting the police for repayment – gold prices hit a 1-month high against the Yuan, fixing at the city's new benchmarking auction some $6 per ounce above equivalent London quotes this morning.
 
With commodity prices rising 14% from February's new 12-year lows, meantime, UK fund management group Schroders – which saw client assets swell to a record £325 billion by end-March ($472bn) – has launched an Alternative Solutions Commodity Total Return, investing in energy, agriculture and the metals sector according to CityWire.
 
Crude oil held steady at $45 per barrel of US benchmark WTI on Thursday, while corn held 10% above March's new 1-year low.
 
After gold bullion rose at the fastest pace in 3 decades during the first quarter, South African investment house Investec now reckons gold will be the best performing metal or mineral in 2016.
 
Bank and trading-house analysts have meantime raised their average 2016 full-year forecasts by $90 per ounce since the start of January, reports Thomson Reuters today, up from  $1118 to $1209.
 
"The chief supportive factors," the news-wire quotes Austalian financial group Macquarie's analyst Matthew Turner, "are the shift in Fed stance, the weaker Dollar and the prospect of inflation."

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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