Gold News

Gold Price Sentiment "Positive But Fragile" at $1300 as US Stocks "Face Bubble" Yet Investors Stay Bullish

GOLD PRICES dipped briefly back below $1300 per ounce in London lunchtime Thursday before rallying $6 to trade 2.8% down for the week so far.
 
Western stock markets followed China's main equity index lower, while the US Dollar edged up against the Yen and Sterling but was flat near 5-month highs vs. the Euro.
 
That helped the gold price for Euro investors hold above €960 per ounce, recovering one-third of the week's earlier drop.
 
"Gold's rally above $1300 could be the last hurrah in any upwards price move over the next few months," said Australian bank ANZ's senior commodity strategist Daniel Hynes to CNBC overnight.
 
Repeating his bank's call for gold prices to end 2014 back at 2013's three-year low of $1180, "Ultimately it's a stronger US Dollar and the increase in real interest rates [after accounting for inflation] which are going to weigh on the gold price," Hynes said.
 
Testifying to the US Congress for a second day Wednesday, Federal Reserve chairwoman Janet Yellen said "It is utterly necessary for us to provide more monetary-policy accommodation," rebuking suggestions of following a mathematical formula based on economic data.
 
New data showed Thursday showed a sharp drop in new US home building and permits in June.
 
Foreclosure rates amongst mortgage borrowers also fell, down to the lowest level since 2006 and 16% below a year ago, according to RealtyTrac.
 
Asset prices are " in line with historic norms," Yellen told lawmakers Wednesday, but she did point to "substantially stretched valuations" in social media and biotech stocks. 
 
Bond prices rose with commodities as stockmarkets fell on Thursday, pushing 10-year US Treasury yields down to 2.51% as crude oil added 0.8%.
 
Silver followed gold prices to rise above $20.80 per ounce – some 3.0% below last Friday's finish.
 
Three-in-five financial professionals now think the US stockmarket is in a bubble, or on the verge, according to a Bloomberg Global poll.
 
The bull/bear ratio from Investors Intelligence's latest poll reads 4-to-1 meantime – "the highest all year, close to the peak of 2013 and approaching levels not seen since early 1987," according to Talking Numbers.
 
"Yellen's warnings about the high valuations of some bond and stock prices could have been positively interpreted for gold," says a note from German commercial and London bullion bank Deutsche Bank.
 
But looking at Wednesday's quiet action, "Obviously, it just doesn't fit into their near-term outlook," the note adds.
 
Reviewing last month's 6.1% rise in gold bullion prices, the precious metals team at Japanese trading house Mitsui say "We feel that sentiment has now started to shift in favour of a bullish position after a year of price declines and negative expectations.
 
"This sentiment is fragile but the coexistence of bullish and bearish views should be more interesting for the market."

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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