Gold Prices Rally Ahead of Key US Jobs Data as China's Gold Demand Falls, Trading Jumps

Thursday, 5/05/2016 14:19

GOLD PRICES recovered one-third of this week's 2.4% drop from 16-month highs above $1300 per ounce on Thursday in London, rallying as the Dollar paused its rise following weaker US jobs data.

Silver again extended the move in gold, jumping 2.5% from yesterday's 1-week low to touch $17.61 per ounce as the start of New York trading approached.

Following yesterday's shock miss on the private ADP estimate, Friday will bring the US government's monthly estimate of net job creation – a data point often spurring strong volatility in currencies and financial markets, including gold and silver prices.

New data today showed the number of jobless benefits claimants rose again last week from mid- April's four-decade low.

World stock markets meantime held flat, curbing 3 days of losses, while bond prices slipped but commodities jumped, led by a 4% surge in crude oil.

"The [precious metals] complex feels overdone," says London brokerage Marex Spectron, repeating its comment to clients earlier this week, "but it may be a while before any correction happens.

"The [gold price] still seems to be happy meandering around at these levels, and it will take some form of external factor to move it conclusively."

New data Thursday from the China Gold Association said trading turnover on the Shanghai Gold Exchange rose 45% in the first 3 months of 2016 from the same period last year, while gold contract trading on the Shanghai Futures Exchange rose 79%, but the country's demand for physical gold declined.

"Gold is approaching near key graphical support of $1264-1270," says the latest technical analysis from French investment bank and bullion market maker Societe Generale, after meeting "resistance" at the January 2015 high of $1307 per ounce.

"Short term, upside is likely to remain capped. [But] it is worth underlining that gold prices, for the first time in years, breached the monthly Moving Average and the down channel [starting from 2013] on the higher side [at] $1264."

"[Monday's] new high not confirmed," says the latest Technical Weekly from German financial services group Commerzbank, pointing at momentnum indicators after the failure to hold above $1300 per ounce.

"We would allow for some profit taking here...[But] provided key support holds at $1245, we still favour a recovery and a retest of the topside."

Gold prices in China – the world's No.1 miner, importer and consumer nation – today fixed at Shanghai's new benchmark auction level with international quotes, having risen from a discount to a $2.35 premium on Wednesday.

Claiming a "growing influence" for the world's second-largest economy on global gold prices, government-sanctioned trade body the China Gold Association today said the country's gold mining output held flat in the first quarter of 2016 from Q1 2015 at 112 tonnes.

Gold consumption meantime fell almost 4% to 318 tonnes overall, with jewelry demand dropping 14% and industrial use falling 5%, but investment demand rose sharply.

Gold bullion bar demand rose 22% to more than 91 tonnes, while gold coin demand totalled almost 8 tonnes, an increase of 130%.

The People's Bank of China meantime issued a new rule, to start 1 June, allowing wholesalers to import or export gold up to 12 times using 1 permit, rather than applying separately each time – a move aimed, according to the Shanghai Daily, at " increas[ing] bullion imports."

China, like world No.2 consumer India, bans the export of gold bullion, requiring some manufacture into jewelry or other items before gold can be shipped out.