Gold News

Gold Prices Seen "Friendless" on US Recovery But "Weak Oil Positive Overall" as Eurozone Forecasts Cut

GOLD PRICES continued to trade in yesterday's 1% range above new 4-year lows in London on Tuesday, peaking at $1174 per ounce as world stock markets also held flat but commodities sank and bond prices rose amid forecasts for slower economic growth.
 
Gold prices have lost more than 7% against the Dollar in the last two weeks.
 
Crude oil today extended its drop over that time to nearly 9%, hitting fresh 3-year lows on North American contracts as Saudi Arabia cut costs to US customers but raised them in Asia.
 
"We see weak oil prices as bullish for gold overall," said a special report from Japanese trading house Mitsui in late October.
 
"The perception as well as the reality of a slowing global economy," says the 4-page note, "may start to weigh on US growth and should help limit any US Dollar strength [and] will also depress inflation...encouraging the major central banks to pursue loose or unconventional monetary policy for longer."
 
With Asian stock markets slipping for a second session Tuesday, interbank lending rates in China again fell sharply, pointing to expectations that "monetary policy may be loosened further" by the People's Bank "amid weak economic conditions," according to one Shenzen-based bond analyst.
 
Shanghai gold prices held flat in the quietest trade for a week, cutting the premium over London quotes back below $1 per ounce by the close of business.
 
The US Dollar meantime slipped back from new multi-year highs to trade at $1.25 per Euro and $1.60 per British Pound.
 
Ahead of this Thursday's European Central Bank vote on monetary policy – already holding rates near zero, with negative rates on commercial bank reserves amid a QE-style bond buying scheme – Spanish unemployment shocked analysts with a sharp jump for October.
 
The 18-nation Eurozone economy will grow barely 1% in 2015, new forecasts from the European Commision said today.
 
"With gold having no yield and limited industrial use," said a note Monday from Citigroup global macro analyst Jeremy Hale – urging clients to sell gold short using derivatives contracts – then "as we approach Fed tightening (or expectations thereof) we still think gold has no friends.
 
"This leaves a bleak price outlook for the yellow metal, so long as the Fed hawkish tone and US Dollar bid remain."
 
Gold priced in Euros held around €933 as the London PM Gold Fix approached – only 1.5% below its last 12 months' daily average.
 
Gold priced in Dollars, in contrast, traded 8.5% below its 1-year average.

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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