Gold News

Gold Prices Jump 0.9% on US Inflation Data, GLD Shrinks Despite Ukraine "Safe Haven Bid" as India Confirms Anti-Gold Import Rules

GOLD PRICES dropped and then spiked Tuesday lunchtime in London, as new US data showed consumer-price inflation holding steady at 2.1% in June.
 
The new government of India earlier said it will retain anti-gold import rules – imposed last summer by the previous administration –  defying India's gold and jewelry industry hopes and aiming to continue curbing the No.1 gold-buying nation's currenct account deficit with the rest of the world.
 
World stock markets rose Tuesday, as did energy and base metal prices.
 
The UK government meantime pushed for tougher EU sanctions against Russia over the downing of Malaysian flight MH17 over eastern Ukraine last week.
 
With more than 600 Palestinians and 29 Israelis reported killed in the last fortnight meantime, US and UN officials today met in Cairo to try and broker a cease-fire in Gaza.
 
"Tensions over the Ukraine kept safe-haven buying active," says a note from Australia's ANZ Bank.
 
But the quantity of gold bullion needed to back the world's largest gold ETF, the SPDR Gold Trust (NYSEArca:GLD), shrank Monday to erase the previous trading day's gain at 803 tonnes.
 
Derivatives betting on gold prices rose in contrast, adding 1% to the number of both futures and options contracts now open at the US-based Comex exchange.
 
Gold prices today jumped 0.9% after June's US inflation figures, steadying above $1310 per ounce to trade unchanged for the week so far.
 
The US Dollar also rose after the inflation data, briefly pushing the Euro near 2014 lows at $1.3550.
 
Gold prices for Eurozone investors rose above €970 per ounce – a 3-month high when hit in the wake of "dovish" comments on US monetary policy from Federal Reserve chief Janet Yellen in mid-June.
 
Reviewing gold prices since 2001, the metal is " ranging (and compressing) between the larger trends," says a note from Diapason Commodities Management in Lausanne.
 
Short term, "Precious metals are likely to retrace a little further," reckons technical analyst Axel Rudolph at Germany's Commerzbank in his weekly chart book.
 
"Only a rise above the current July high at 1345.30 would make us re-instate our bullish forecast."
 
"Resistance shows first at $1319," say technical analysts at London market-making bank Credit Suisse, "then the 61.8% retracement of the recent fall at 1325.
 
"Above here," they agree with Rudolph, "[we] would look to the $1345 recent high where we would again expect selling."
 
Meantime in India – where BJP finance minister Arun Jaitley today backed "continuing" the anti-gold import rules set by the previous government – the central bank has set new rules for  households borrowing against gold.
 
Loans made for non-agricultural purposes must not exceed 75% of the value of the gold used as collateral, and can run for no more than 12 months. But the total loan to any one borrower is now uncapped, against a previous ceiling for gold loans of 100,000 Rupees ($16,500).
 
A boom in agricultural gold loans to Indian farmers in southeastern coastal state Andhra Pradesh "[has been] used for other activities," a finance department official said Monday, including fresh purchases of gold.
 
"Another reason for the rising number of loans," says the Deccan Chronicle, "was [AP state's] chief minister N.Chandrababu Naidu's election promise of waiving off all farm loans after coming to power."
 
Naidu's administration today waived some $25,000 of state farming loans per family, the paper says.

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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