Gold News

Gold Prices Sidestep Drop in World Equities, Commodities Slump as Dollar Rises Again

GOLD PRICES held around $1220 per ounce Friday lunchtime in London, little changed from yesterday's drop as world stock markets plunged with commodity prices.
 
The US Dollar rose, nearing this week's new 11-month highs to the British Pound and two-year highs vs. the Euro.
 
Trading 3.1% above Monday's early trip to 2013's double-bottom near $1180, gold priced in Dollars headed for its highest weekly close in four.
 
Germany's Dax equity index sank 1.6% to new 1-year lows. Major economy government bonds were unchanged.
 
"If the US equity correction continues to gain ground," says one US broker in a note, "we could see gold do a lot better going forward."
 
"The markets do not want to get ahead of themselves," cautions London Marex Spectron, "and need to consolidate now rather than attempt lift off."
 
"Weaker economic data outside the US of late is clearly preventing the sort of gold price fall that other precious metals are experiencing," says German bank and gold retailer Commerzbank's commodity team.
 
"What is more, some market participants are interpreting the ongoing slump in oil prices as heralding a pronounced cooling of the global economy, which is sparking increased demand for gold."
 
Brent crude oil contracts today dropped 2.2% at one point, nearing a 4-year low.
 
Platinum and palladium both fell hard, dropping 2.2% and 3.1% respectively from Thursday's peak, but also hold higher for the week.
 
Copper headed for its 7th weekly loss in succession, according to Bloomberg data, 
 
Silver prices were also weaker, halving the week's near-6% rise to trade at $17.25.
 
The giant iShares Silver Trust (NYSEArca:SLV) yesterday cut the amount of bullion held to back its shares as investors cut their exposure, extending this month's drop from new record levels to 0.7% below 10,813 tonnes – equal to around 45% of last year's global silver mining production.
 
"Investors are probably looking for stimulus again," said Jonathan Barratt at Sydney's Ayers Alliance Securities overnight.
 
"[Thursday's] weak Dollar also helped to squeeze short sellers" betting that prices will fall.
 
Overnight action in the Shanghai Gold Exchange was again strong, with premiums to London gold prices holding near $4 per ounce.
 
"China should remain a buyer around these levels," reckons refinery group MKS, pointing to the SGE premium "sitting around $3-4 since their return from Golden Week."
 
UK trade data today showed London's bullion vaults – center of world trade in wholesale Good Delivery bars – adding 42 tonnes net of exports in August.
 
That cut the UK's net outflow of gold bullion to below 200 tonnes for 2014 to date, markedly slower than the 1,440 tonnes shed during the 2013 price crash.

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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