Gold News

Gold Prices "Mildly Bullish" on Charts as Focus Turns to Fed Tapering & Physical Demand

GOLD PRICES were unmoved Monday morning in London, trading barely 25c higher at $1317.50 per ounce as European stock markets also halted their rise, holding global equities near 5-year highs.
 
Gold prices in Shanghai today pulled back to $7 per ounce above London benchmarks, with Australian bank ANZ saying trading will "likely be subdued" as a result.
 
Imports of silver bullion to China meantime fell 5.5% in September from August to 243 tonnes, new data showed.
 
That was 13.9% lower from September last year, says Reuters.
 
With the US debt ceiling resolved until January, says Jonathan Butler at Japanese trading conglomerate Mitsubishi, "Attention [in gold prices] should return to the strength of the US economy, Fed tapering (now less likely to start this year, in our view) and physical demand.
 
"On a technical level, last week's moves point to a mildly bullish outlook."
 
Calling last week's action in gold prices "a bullish engulfing pattern," the latest chart analysis from Scotiabank says it offers "an encouraging sign that the bear channel of the past 2 months may be about to turn, though it is still early."
 
The US Dollar stemmed its response to last week's 3-month fix to the US debt ceiling, finding a floor against the Euro at $1.3675.
 
US jobs data in the Non-Farm Payrolls report – seen as key for the Federal Reserve's monetary policy – will now be released Tuesday after being delayed by the debt-ceiling shutdown in Washington.
 
Weekly data on gold and silver positioning in the US futures market remain delayed, meantime, as regulator the CFTC re-opened with other government departments.
 
Like gold, US debt prices also capped their rise early Monday, holding 10-year US Treasury bond yields at a 9-week low of 2.58%.
 
That compares to the two-year high of 3.00% reached in mid-September.
 
"[The debt ceiling deal] may not be clean and neat," Bloomberg today quotes Kit Juckes, global strategist at French investment bank Societe Generale, "but there's still perception out there that Treasuries are risk-free."
 
"The hard truth for China," says Li Jie, head of foreign reserves research at the Central University of Finance & Economics in Beijing, "is that there's no alternative to US Treasuries."
 
Despite trimming $95 billion off their total $4 trillion position in US debt since July, foreign central banks know that "whatever happens, undertaking a massive selloff of US bonds is not an option," says Li. 
 
In contrast to gold prices on Monday, silver rose sharply, adding 1.7% to near 2-week highs at $22.29 per ounce.
 
Platinum meantime rose to 4-week highs, extending its spread above gold prices to a two-month high of $120 per ounce.
 
Palladium recorded its best AM London Fix since the end of August.
 
"We maintain our fairly pessimistic outlook for gold," says a note from US investment bank Morgan Stanley, "as we believe gold prices have fully factored in a turn in the US interest rate cycle.
 
"Gold's tepid response to the recent positive events confirms our view that tapering [of the Fed's quantitative easing] has been postponed, not cancelled, and is expected by year-end."
 
Saying that gold prices have "run out of steam", analysis from Baclays Capital in London adds that "More worrisome has been the lack of physical demand support amid the seasonally strong period for consumption in India, making the floor for prices fragile."

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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