Gold News

Gold Prices "Digest Bearish Factors", Bounces from 11-Week Low as Ukraine "Peace Deal" Sees Crude Oil Jumps with Moscow Equities, Ruble

GOLD PRICES bounced 0.5% from a new 11-week low Wednesday morning in London, turning higher from $1261.50 per ounce as London's stock market followed Wall Street towards new all-time highs.
 
After meeting Ukrainian president Poroshenko, Russian president Putin reportedly said a peace deal between Kiev and pro-Russian separatists – whom the Kremlin continues to deny controlling – could be complete by Friday.
 
US president Obama meantime sent another 350 troops to protect the US embassy in Baghdad, urging "a stronger regional partnership" against Islamic State forces in Iraq and Syria after the apparent beheading of a second US journalist.
 
Russian equities jumped together with the Ruble currency, and Europe's Brent crude oil benchmark added over 1% to $101 per barrel as major government bond prices slipped back, nudging Eurozone yields higher from their historic lows.
 
Ahead of tomorrow's European Central Bank decision, widely expected to bring form of monetary easing, the Euro currency also rallied, adding half-a-cent from Tuesday's new 12-month lows near $1.31.
 
That saw gold priced in Euros dip back to late-August's two-week low at €960 per ounce.
 
"Geopolitical tensions do not seem to be providing gold prices with much of a bid," says a monthly market overview from Edward Meir at US brokers INTL FCStone.
 
"We suspect this is because the apparent political upheavals are not impacting the global equity or bond markets, other than to cause them to rally!"
 
Gold bullion needed to back the value of shares in the SPDR Gold Trust – the world's largest exchange-traded gold fund (NYSEArca:GLD) – fell 0.2% yesterday to the lowest level since end-June.
 
Now down at 793 tonnes, the GLD's gold backing is below where it ended 2013 after sheddingg 552 tonnes last year.
 
Gold ETF holdings across all investment products "have been almost flat for the last two months," says Japanese trading house Mitsui's David Jollie, "with little momentum visible.
 
"Rather like the situation in the wider [gold] market."
 
Investors are instead choosing to buy ETFs holding real estate outside the United States "at a record pace" reports Bloomberg, citing low interest rates and "distressed prices" still lingering after the global financial crisis.
 
Pointing to central-bank policies, global inflation and currency-market moves, analyst James Steel at global bank and London market-maker HSBC says "The macroeconomic factors that tend to affect gold prices are on balance bearish.
 
"That said, the gold market appears to have largely digested many of these factors...[and] long-run economic and demographic trends [in Asia] argue for increasing emerging market bullion demand."
 
Repeating his 2014 average gold price forecast of $1292 per ounce, "Near-term gold consumption would likely be stimulated," says Steel, "by any decline in prices to or below the $1200 per ounce level."
 
Spot gold trading in Shanghai's most active contract reached its busiest level in 2 weeks on Wednesday as prices fell to their lowest level since 5th June.
 
"Light physical buying was evident [overnight] around $1265," says one Asian trading desk, "but the potential for a further sell off later in the week may keep buyers on the sidelines for now."

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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