Gold News

Gold Prices to 1-Week Low as Safe Haven Demand Falls

GOLD PRICES fell to a one-week low at $1232.55 per ounce on Friday in London as safe haven demand was eroded after a rebound in US equities and a strengthening dollar.

The 10-year US Treasuries yields reached 2.25% and the Brent Crude contracts dropped 1% to $86.

The Euro vs the Dollar was hovering around the mid-October level, at 1.2643.

Gold prices recovered some of Thursday’s drop below last week close, to trade around $1232- 1233 Friday lunchtime, a week low. Gold in GBP followed the same pattern. For the Eurozone investors, gold held over and above last week’s close.

Following the US data release, investors re-assessed their options as equities rallied and dollar rose while gold safe haven demand dropped. “Greater risk appetite and low inflation is likely to keep bullion weak in the near term,” told James Steel from HSBC to Bloomberg this morning.

Gold Futures volume didn’t vary much from the 100-day average, according to the news agency.

Silver prices tracked gold to finish almost unchanged on the week. The Gold/Silver Ratio held its 5-year high at 1:71.4.

The total silver investment over the next decade could rise by 1 billion ounces (31,103 tonnes) according to The Silver Institute’s new report produced by the CPM Group, ”Silver Investment Demand.”

The giant SPDR Gold Trust (NYSEArca:GLD)  shed more than 11 tonnes of gold this week to a total of 749.87 tons, its lowest level since late 2008.

Gold sales in the second biggest consumer nation meantime jumped by around 20% amid the festival season, according to a senior official of India. The surge of demand is reflected in a premium rise of $17-$18 per ounce over London prices, compared with $12 last week.

"This year prices were low, sentiment was good and we have a stable government in the centre; all of these helped boost sales," said Bachhraj Bamalwa, director at the All India Gems and Jewellery Trade Federation, to Reuters.

Bamalwa added that even after the end of the major gold festivals of the year the demand could stay strong due to the wedding season that will last until early 2015.

The UK economy continued to recover in Q3. Based on the GDP, published by the Office for National Statistics, Britain’s economy expanded for the seventh period and is now 3.4% above its pre-crisis peak. Although down to 0.7% from 0.9% in Q2, it was still one of the fastest recoveries among European countries. With service, production and construction, all main sectors contributed to the growth.

Consumer confidence in Europe’s biggest economy stabilised too, as the research group GfK reported. Germany’s consumer climate index edged slightly up to 8.5 points, compared to 8.4 in the previous month. However, economists recently cut their growth forecast due to disappointing industrial data for August.

In the meantime, fears over the spread of Ebola rose. A US doctor has been tested positive for Ebola today after returning from Ebola-hit Guinea where he worked for a global aid agency. This was the first case of the virus in New York. However, “there is no reason for New Yorkers to be alarmed,” as New York’s mayor Bill de Blasio reassured the population.  

Back in London, the LBMA is holding a seminar today with industry participants to discuss the five shortlisted proposals for the gold price “Fixing” mechanism.

Investors also waited for key economic US data - durable goods orders and consumer confidence. They were due along with the Fed decision on interest rates and the pace of their bond purchasing programme which could conclude this month, despite rumours of its extension.

This Sunday, the EU banks are undertaking an extended stress test exercise.

By Steffen Grosshauser

Steffen Grosshauser is Senior Operations Executive and Head of German-speaking Market at BullionVault, the worldwide biggest physical gold and silver market for private investors.

See all articles by Steffen here.

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