Gold News

Gold Prices Erase Week's Gains as Putin "Seeks Way Out" of Ukraine Crisis, China's Jewelry Demand Plugs 44% Drop in Gold Bar Investment

GOLD PRICES fell hard Wednesday lunchtime in London, dropping $10 per ounce after Russian president Putin offered to "seek ways out" of the Ukraine crisis ahead of a key meeting.
 
Gold prices fell harder still for non-Dollar investors, erasing this week's gains as the US currency held at multi-year lows on the FX market.
 
Shaking off 1-month lows hit by Asian stock markets overnight, European equities turned higher in afternoon trade.
 
Due to meet in Moscow today with Didier Burkhalter – president of Switzerland and chair of the Organization for Security and Co-Operation in Europe (OSCE) – Putin said "You have proposals...ideas of how to find a way out of the situation that has occurred. Our position is known too."
 
Pro-Russian separatists meantime seized the city hall in south Ukraine's port of Mariupol only hours after government forces had taken it back. 
 
Kiev's Foreign Ministry said it "is open to a dialogue that could help de-escalate the situation," backing European Union calls for a second Geneva meeting.
 
"The US recovery regaining momentum and the eventual de-escalation in Ukraine are likely catalysts for lower gold prices," says a new report from London-based consultancy Metals Focus.
 
New US data today showed economic productivity falling much faster than analysts forecast in Jan-March, down 1.7% annually.
 
Labor costs, in contrast, jumped 4.2%.
 
Further ahead in 2014, further tapering of US Federal Reserve quantitative easing, plus easier fiscal policy in Europe, and continued low inflation, "are all headwinds for the yellow metal," the consultancy adds, forecasting a possible 4-year low in gold prices at $1100 per ounce.
 
Metals Focus sees "robust demand" from Asia's largest gold buying nations. But new data Wednesday from the China Gold Association said the world's No.1 buyers slowed their gold consumption growth almost to zero in Jan-March.
 
Rising just 0.8% overall from the first quarter of 2013, China's demand rose 30% for jewelry but fell 44% for gold bars as falling prices dented investor confidence according to China Gold Association president Song Xin.
 
After spiking in early trade Wednesday, Shanghai gold prices ended the day slightly lower against a falling Yuan, driving Tuesday's $1.40 premium to London gold quotes to a $1.40 discount per ounce.
 
The strong opening "enticed some light buying" says one Asian trading desk, but "liquidation set in later.
 
"Reportedly, offers are beginning to stack up above recent highs," it adds, meaning orders to sell set at Monday's 3-week high in Asian gold prices above $1315.
 
Fifteen years to the day since the UK Treasury announced a program to sell from 1999 half the UK's gold reserves by 2002, today's London AM Gold Fix came in above £772 per ounce – some 370% higher from the average price achieved by the UK auctions.

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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