Gold News

Gold Prices Sink on Options Expiry to 3.5-Month Low After Strong US Data, Weak Hong Kong Imports

GOLD PRICES fell to a 3-and-a-half-month low versus the Dollar beneath $1270 per ounce Tuesday lunchtime in London, as world stock markets rose and US data again pointed higher.
 
As London and New York re-opened after long holiday weekends, Dollar gold prices dropped nearly 2% from last Friday's finish, breaking lower from what technical analysts had called a "converging triangle" of lower highs and higher lows since mid-April.
 
With June options set to expire today on the US Comex futures exchange, gold prices fell to $1266 per ounce, the lowest since 7th February.
 
The Dollar also rose against industrial and energy commodities as US data Tuesday showed Durable Goods Orders remaining positive in April while house prices, consumer confidence, services sector and manufacturing numbers also beat analyst forecasts.
 
On the currency market it pushed the British Pound to 2-week lows some 1.3% beneath early May's new 5-year highs.
 
Official data from Hong Kong meantime showed net gold imports from the city into mainland China falling sharply in April to the lowest level since Feb.2013, down one fifth to 65.4 tonnes.
 
Beijing officials have recently allowed greater imports of gold bullion directly to the capital and also to Shanghai – center of China's legal gold trading exchanges – rather than only through the former British colony.
 
Ahead of the US data, Shanghai gold prices earlier closed Tuesday at a slight premium to the world's London benchmark, despite a sharp drop in the Yuan caused by what analysts called "seasonal dollar demand" from Chinese importers.
 
"Physical [gold] demand in Asia and China has improved from the weakness of last month," says Tuesday's note from commodity analysts at Standard Bank. But "we believe it is still not strong enough to push gold prices higher."
 
"This time last year," writes consultant Chen Si Jin at financial site Hexun, "so-called 'Chinese Mothers' rushed into buying gold jewelry at least 20% above the international price."
 
Now losing some 4.6 billion Yuan since then, those buyers need world gold prices " to go back to $1500 an ounce, or even $1600 to get out of trouble," says Chen.
 
Over in India, the former world No.1 gold consumer nation – overtaken by China in 2013 amid an effective ban on gold imports – "We think a significant share of the 'lost' demand is already being met by unofficial imports," say analysts at Morgan Stanley.
 
So in their view, last week's easing of India's anti-gold import rules "[will not] necessarily mean that real demand for gold will see a sudden surge."
 
Central bankers meantime continued a two-day conference in the Portuguese resort of Sintra, where Eurozone policy chief Mario Draghi warned Monday on the " pernicious negative spiral" of low inflation in the 18-member currency union.
 
Echoing comments he made this month about starting some form of QE-style bond buying at the ECB's June meeting next week, Draghi's speech discussed "a more expansionary stance, which would be the context for a broad-based asset purchase programme."

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum 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 he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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