Gold News

Gold Prices Rally $5 from 15-Week Low, Ukraine Crisis "Fails to Spur Safe Haven Support" But ETF Buying Fastest Since Oct.2012

GOLD PRICES rallied $5 per ounce from new 15-week lows at $1261 in London on Wednesday, edging back as European stock markets turned higher and Wall Street looked to another record-high opening in the S&P index.
 
The US Dollar knocked the Euro to 3-month lows on the currency market, while the Chinese Yuan flirted with April's near 18-month lows.
 
Silver moved sideways with gold prices, continuing to hold above $19 per ounce.
 
"We were correct on our assessment of a key technical pennant (or flag) formation on gold," says Ed Meir at INTL FC Stone, "warning repeatedly that some sort of imminent breakout would likely take shape in the aftermath of the Ukrainian elections on Sunday."
 
"Events surrounding the Ukraine election failed to generate safe haven support," agrees Australia's ANZ Bank in a note.
 
What newswires termed "an uneasy peace" followed Tuesday's fighting in Donetsk and other eastern regions of Ukraine, the worst violence of the crisis so far.
 
Russian president Putin will next week meet French president Hollande to discuss Ukraine, his first such meeting since annexing Crimea in March. 
 
With both UK and US traders returning from long holiday weekends, "Tuesday’s gold volume came in at nearly 330,000 lots," says Meir, "almost a one-year high according to Reuters data."
 
"Despite the negative sentiment," counters a note from Swiss investment and bullion bank UBS, "gold's downside test felt quite laboured [and] the move lacked much urgency."
 
But while gold prices are "proving quite resilient," UBS's precious metals team concludes that strong US data plus weakening physical demand make it "only a matter of time before that resilience becomes exhausted."
 
Tuesday's "slump" in gold prices – the third heaviest drop of 2014 to date – "was triggered by reports from Asia," reckons Germany's Commerzbank, pointing to much slower Chinese gold imports and local banks "now clearly sitting on considerable gold stocks which they are keen to reduce before they import any new gold from Hong Kong."
 
Wednesday morning "as expected," says Swiss refining and finance group MKS, "Chinese buying was strong in the initial opening minutes."
 
But as Shanghai prices rose above comparable London quotes, "Chinese banks were eager sellers of the arb...selling SGE/buying loco London, and quickly capped this."
 
Tuesday's price drop saw the giant SPDR Gold Trust ( NYSEArca: GLD) – which enables shareholders to track the cash-price of physical gold – add more than 8 tonnes of gold bullion to its 5.5-year low holding of 776 tonnes, the sharpest 1-day addition by weight since October 2012.

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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