Gold News

Gold Prices Hit Worst Monthly Drop in 6 as "Unworried Investors" Take Stocks & Bonds to Record Highs

GOLD PRICES retreated to yesterday's new 4-month lows Friday lunchtime in London, trading in a tight range above $1251 per ounce as world stock markets eased back from new highs.
 
Hitting a series record on MSCI data Friday morning, world equities were heading for a 1% monthly gain.
 
Gold prices were meantime heading for their worst drop since December's fall back to June 2013's three-and-a-half year lows, down more than 3% for May.
 
"Investors are behaving as if the world is utterly boring," writes Financial Times' columnist and editor Gillian Tett, noting today's pre-crisis levels in stockmarket and currency volatility.
 
"One possible explanation is that the economic outlook has turned benign...A second, less benign possible reason [is] markets have been so distorted by heavy government interference since 2008 that investors are frozen."
 
"Investors showed little concern with [Thursday's US] GDP data," says Commerzbank's commodity desk, and "that sentiment did not bode well for the gold price."
 
"A waning concern about the situation in the Ukraine also helped push the gold price lower," it believes.
 
The US Pentagon today said Russia has pulled "a majority" of its troops back from the Ukraine border, leaving 7 battalions with "several thousands" of troops.
 
"The stockmarket will hold at current levels until the ECB meeting next week," Bloomberg quotes UniCredit strategist Christian Stocker, looking ahead to the European Central Bank's widely-expected cut to Euro interest rates and QE-style asset purchases.
 
"Should the ECB disappoint the market, then I expect a negative reaction."
 
The Euro currency steadied above 4-month lows to the Dollar on Friday, while Eurozone government bond yields ticked higher from record lows.
 
US Treasuries also trimmed their best monthly price-rise since January.
 
"Treasuries are gaining because of reduced concern on inflation," reckons one London director of fixed income.
 
"We expect further Bund outperformance vs. Treasuries," says a detailed report from Societe Generale's Cross Asset Research group, targeting higher German bond prices with the 10-year yield spread over comparable US debt rising to 1.5 percentage points from 1.1 at present.
 
Over in Asia on Friday, Shanghai gold prices held at a small premium to London quotes as the Yuan rallied from this week's 1-month lows near the weakest level since March 2013.
 
Trading volumes on the Shanghai Gold Exchange were again strong, although half the level of Wednesday's 11-week high.
 
Indian premiums meantime "halved this week" over London gold prices, Reuters reports, as buyers awaited further easing of the No.1 consumer nation's import curbs from the new BJP government led by Narendra Modi.
 
Dropping to $30-40 per ounce, India's gold price premium has now fallen 80% from last autumn's record highs.

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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