Gold Prices Break Higher from "Doji", Investing "Attractive" Long-Term as Real Rates Stay Low Despite Rich-World Growth
Wednesday, 6/11/2014 14:00
GOLD PRICES touched new 2-week highs against all major currencies in London Wednesday lunchtime, creeping higher with silver as European stock markets failed to follow Asian equities higher.
MSCI's Asia-Pacific index touched new 6-year highs, rising 11% from this year's low in February.
Crude oil hit 3-month highs as Iraqi militants extended their capture of Mosul, with Turkish media reporting that
Turkey's consulate in the city was seized today.
"Stops were triggered in gold prices [Tuesday] as we moved through the recent highs," says a note from broker Marex Spectron's London office.
But hope of "a genuine short covering rally" – with bearish traders forced to close their
gold futures bets at a loss – "was short lived as the market went back to sleep and moved sideways."
Even so, says bullion bank Scotia Mocatta's technical analysis, "Gold closed higher...resolving two doji sessions" which had seen the gold price start and end almost unchanged.
That "implies the market is undecided about the price," explains the Hong Kong dealing desk of Japanese trading house Mitsui – adding that gold prices made a 'doji' candle on the weekly chart last Friday – "and also contains the possibility of a reversal of trend."
Last week's low at $1242 "looks like a good line of support on the short term charts," Mitsui's note goes on. "So there looks like scope for move higher."
"Momentum indicators have shifted," agrees Scotia, "poised for a bullish break."
Longer-term, "We find
gold attractive at current valuations," says a new research note from US bond management giant Pimco, expanding on CEO Bill Gross's thesis of a "new neutral" level for interest rates, much lower than seen in previous economic cycles.
"The commodity most affected by the New Neutral expectation of lower
real interest rates is gold," Pimco explains. Because "the lower the real interest rate, the more attractive this commodity."
Also releasing new forecasts, the World Bank says "the recovery in high-income countries is gaining momentum," with growth in the rich West outweighing a slowdown in China for 2014.
In particular, "The contribution of high income countries to global trade volumes
will more than double" by 2016, the report says.
What Reuters calls "trial gold imports" by Chinese banks have begun directly into Shanghai's free trade zone, where the Shanghai Gold Exchange plans to launch an international bullion market.
"It's going to become tricky to know anything about gold in China now," the newswire quotes a trader in Hong Kong, through which China currently takes the vast bulk of its gold imports.
"There is no doubt going to be some confusion understanding their buying pattern."
India's trade deficit – a key target of the previous government's anti-gold import rules – widened for the 3rd month running in May new data showed today.
Gold imports fell by almost three-quarters compared with the same month last year.
India must "rationalise" its gold import duty, new trade secretary Rajeev Kher said in New Delhi today.
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