Gold News

Gold Prices 'Take a Beating' from US GDP Data as Greek Debt Agreement Unravels, Chinese Traders Jump on Sub-$1200 Offers

GOLD PRICES fell hard against a rising Dollar in London trade Wednesday, but held dead-flat for Euro traders as a resolution to the latest Greek debt crisis was thrown into doubt.
 
The US currency rose on the forex market after new data showed the US economy shrinking only 0.2% per year in the first quarter, markedly less than first estimated.
 
Europe's single currency meantime fell – and Eurozone stock markets sank – after Greek prime minister Alexis Tsipras said some of Athens' creditor nations had rejected the austerity reforms proposed to much fanfare on Monday.
 
With Greek bond prices slipping, and Germany's Dax stock index turning an earlier 0.5% gain into a near-1% loss, Tsipras was due to fly back to Brussels on Wednesday for fresh talks.
 
"Event risk remains high," says the Hong Kong team at Japanese trading house Mitsui Global Precious Metals.
 
Greece's concessions at Monday's Eurogroup meeting "result[ed] in a swift drop for gold through intra-day supports," they add.
 
"Gold has resumed its downtrend," agrees the trading desk at London market makers Societe Generale, "on the back of renewed optimism for a Greek resolution.
 
"Equities cheered a possible agreement and gold took the beating."
 
But with that solution on Greece now uncertain – and equities retreating sharply –"Gold has traded in a very narrow range, with the market waiting to see what happens," says China-owned ICBC Standard Bank.
 
"There is still a high degree of uncertainty with participants instead seeming happy to sit on the side-lines."
 
Over in Asia, and "with China returning from their holiday [Tuesday]," notes the trading desk at Swiss refining and finance group MKS, "they had last seen the metal trade above a $1200 spot price.
 
"[So] traders were not disappointed with heavy volumes going through" on the Shanghai Gold Exchange, MKS says, with Wednesday's SGE data showing further growth in turnover again.
 
Premiums on gold bullion delivered inside Shanghai's free-trade zone and dealt via the SGE's international bourse rose to $2.50 per ounce over London quotes – the top end of the last month's range.
 
One day before global trade body the London Bullion Market Association holds its annual Asian forum in Shanghai, Reuters on Wednesday quoted Chinese 'sources' saying that Beijing is about to approve a Yuan-denominated price benchmark – akin to London's 100-year old Gold Fix, now set in Dollars via the legally-regulated LBMA Gold Price auction.
 
China's Zijin Mining – the world's No.1 gold miner by market cap, and the largest miner in what has been the world's No.1 gold-mining nation since 2007 – said yesterday it is extending the $1 billion of acquisitions made over the last 12 months into a 10-year plan.
 
New UK data meantime showed mortgage approvals hitting a 10-month high in May, with the Pound rising sharply on the FX market, squashing the gold price for Sterling investors near fresh 7-month lows beneath £744 per ounce.

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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