Gold News

Gold Prices Jump Near $1200 on Shock US Trade Deficit, Asian Premiums Slide as Global Equities Fall

GOLD PRICES rose sharply lunchtime Tuesday in London, with traders returning from the UK's long May Day weekend bidding gold 1.6% higher from where it ended last week on news of the worst US trade deficit in 6.5 years.
 
Rising within $1.20 of $1200 per ounce, gold prices also rose against the Euro and Sterling after quiet trade in Asia overnight saw premiums in both India and China – over and above quotes for London settlement – fall below $2 per ounce.
 
"We're not seeing any big flashes of demand at the moment," TheBullionDesk quotes analyst Chirag Seth at consultancy Metals Focus in Mumbai, "which is clearly being reflected in the premiums."
 
With China's main stock market losing 4% on Tuesday, the stance of Shanghai gold trading "was a net seller from the onset," says Swiss refining and finance group MKS's Asian desk, adding that "It was [also a] Tokyo holiday once again, which meant liquidity was lower than normal."
 
Silver bullion meantime doubled the gain in gold prices from last Friday's finish, nearing last week's highs at $16.70 as crude oil hit the highest level in 5 months above $60 per barrel after new US data showed imports of goods through West Coast ports surging on March's resolution of labor disputes with dock workers.
 
That pulled the United States' overall trade deficit 43% wider from February – the fastest jump in almost 20 years.
 
"Nonfarm payrolls this Friday will likely provide the focus point for the week," reckons ICBC Standard Bank's commodity analyst Leon Westgate.
 
"Gold and silver [are] unlikely to break out of their recent holding pattern until there is greater clarity on the US economic situation and how that feeds through to rate hikes."
 
On a technical analysis, the gold price "remains capped by the 200-day ma and our stance is neutral to negative," says Karen Jones in her weekly chart book for Germany's Commerzbank, pointing to gold's failure last week to reach the moving average of its last 200 daily prices, now at $1221.50 per ounce.
 
Even though "technical signals are generally neutral," says bullion market maker Scotia Mocatta, "We continue to expect further downside [and] await a meaningful break below $1180."
 
The Dollar gold price "continues to probe the lower level of the [recent] range," agrees Swiss investment and bullion bank UBS in a technical note, saying that "a break of $1170 would open further lows towards...the key support" near $1143 per ounce – the low of mid-March.
 
Eurozone stock markets meantime followed Asia down, dropping 0.6% as New York equities opened the day lower.
 
UK shares rose in contrast, even as Gilt prices sank, pushing the yield on 10-year UK public bonds up to 1-month highs near 1.95% ahead of this Thursday's General Election – likely to result in a 'hung' parliament needing a coalition of political parties to form a government.

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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