Gold News

Gold Prices Flat Before Yellen, Asian Trade "Surprisingly Muted" After Sharpest 1-Day Drop of 2014

GOLD PRICES moved sideways in a $7 range Tuesday in London, holding above $1306 per ounce after yesterday's 2.1% drop while European equities failed to extend Monday's gains.
 
Israel accepted an Egyptian proposal for a cease-fire in Gaza, but rocket attacks continued.
 
US retail sales missed analyst forecasts, new data showed meantime, growing only 0.2% in May after a better-than-first reported 0.5% rise in April. 
 
Gold priced in Sterling worsened Monday's drop, the sharpest 1-day fall of 2014 to date, by dropping to new 4-week lows at £762 as the Pound jumped following a surprise rise in the UK's official inflation rate.
 
Inflation in the average London house price hit a 20% annual record in May, the government's Office for National Statistics added.
 
"Surprisingly trade flows were quite muted in Asia," says a precious metals note from refining and finance group MKS's Geneva HQ.
 
Despite the Chinese gold price starting Shanghai trade 2.2% below Monday's start, there was "only light 2-way interest," says the note, and "moves to the topside were quickly sold into."
 
That suggests "there are still weak longs out there looking to be covered ahead of today's Yellen speech."
 
Later on Tuesday US Federal Reserve chairwoman Janet Yellen begins two days of semi-annual testimony to Congress.
 
Silver prices this morning rose and failed 5 times to hold above $21 per ounce – a three-month high when first broken by the surge in precious metals after Yellen spoke following the central bank's mid-June meeting.
 
Gold prices at one point reclaimed $10 of Monday's $35 losses, but eased back from $1313.75 as New York opened.
 
Monday saw "a general decline in risk aversion" according to commodity analysts at Germany's Commerzbank.
 
"Concerns over European banking eased," agrees Australia's ANZ Bank, "and equity markets gained...putting gold prices under pressure.
 
"Better than expected Citigroup results" also helped it adds.
 
Tuesday's earnings report from fellow US banking giant J.P.Morgan also beat the Street, but showed an 8% drop for Q2 from the same period last year. 
 
"Gold may also have had a belated reaction to the selloff we saw in the oil markets on Friday," says INTL FCStone analyst Ed Meir.
 
But looking at the structure of Comex gold and silver derivatives, "Both metals' price moves were exacerbated," say commodity analysts at Macquarie Bank, "by a reversal of the extreme increase in speculative positioning seen in recent weeks."
 
In exchange-traded funds, Monday saw the giant SPDR Gold Trust (NYSEArca:GLD) add 8 tonnes to the gold bullion backing its shares, extending its best period of growth since October 2012 to two weeks.
 
The GLD's current holdings of 808 tonnes are the largest since early April, and down some 40% from the peak of late 2012.

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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