Gold News

Gold Prices Lose "Short-Covering Rally" After Strong US Jobs & GDP Data

GOLD PRICES fell hard Thursday lunchtime in London, giving back all of yesterday's sudden 3.1% jump to trade back at $1223 per ounce after stronger-than-expected US economic and jobs data.
 
European and US stockmarkets fell marginally after the Bureau for Economic Analysis revised its GDP estimate for the third quarter of this year up to 3.6% annual growth, well beating analysts' 3.0% forecast.
 
Ahead of Friday's Non-Farm Payrolls data for November, last week's claims for initial jobless insurance then came in below 300,000 for only the second time since 1997.
 
Gold prices had already ticked lower from Wednesday's jump to $1250 per ounce, but then fell swiftly.
 
Silver held onto a chunk of yesterday's 5.1% gain, but also traded sharply lower with gold prices after the GDP data, falling to $19.30 per ounce.
 
Neither the European Central Bank or Bank of England made any changes to their record-low interest rates, lending or quantitative easing at their December meetings today.
 
UK chancellor George Osborne forecast to Parliament that the government will run a budge surplus as soon as 2019.
 
The Pound fell towards 1-week lows.
 
Gold prices in Sterling slipped to £747 per ounce, some 0.8% above Wednesday lunchtime's new 3-and-a-half-year low seen just before the jump.
 
Wednesday's action "formed an outside day reversal warning," says ScotiaBank's technical analysis, with gold prices hitting a new 5-month low but ending US futures trading sharply higher.
 
"However, as the daily trend remains bearish, the signal would have to be confirmed by an up day [on Thursday]."
 
Following what Commerzbank's commodity team calls "a sharp reversal immediately" on the release of yesterday's much-better-than-expected US jobs data from the private ADP payrolls service, "a short covering rally ensued" it says, with bearish traders betting on lower gold prices forced to close their positions as the market rose.
 
Ahead of Friday's official US jobs data, "The markets are still positioned quite short," reckons ANZ Bank analyst Victor Thianpiriya, quoted by Reuters.
 
"There is going to be a bigger reaction to a weaker-than-expected nonfarm payrolls report than to stronger-than-expected numbers."
 
Looking further ahead, "Tighter monetary policy in the US and rising rates are hanging over the market," said a note from Bank of America-Merrill Lynch analysts this week.
 
"[That] could push gold prices towards $1100 per ounce in 2014," it believes. "Yet while the pause in the bull market may continue, we see several encouraging signs, most notably physical demand from emerging markets, that suggest...gold remains a sound medium-term investment."
 
But "we are seeing continued outflow of gold investment holdings," counters one Singapore trading desk in a note, "and the physical demand from Asia seems insufficient to halt gold's decline."
 
Gold prices achieving "a successful hold above $1180 would...be the best case scenario amidst mounting bearish pressure," it adds.
 
Crude oil meantime rose to 5-week highs Thursday morning, with Brent crude touching $112 per barrel, after the US reported a sharper than expected drop in weekly stockpiles.
 
The Opec oil cartel of 12 major producer nations yesterday maintained its 30 million barrels-per-day quota for 2014, but may have to cut output by 2.5% later next year to support prices, reckons Gareth Lewis-Davies, senior energy strategist at French investment bank BNP Paribas.
 
India's DNA news-site says half-a-tonne of gold is being smuggled into the country each day, citing "top officials" at the Directorate of Revenue Intelligence.
 
"Contrast this 15 tonnes per month with finance minister P.Chidambaram's target of 20-25 tonne [of legal] imports," says DNA.

Adrian Ash is director of research at BullionVault, the physical gold and silver 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 is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news. Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and TheStreet.com in New York; Germany's Der Stern; Italy's Il Sole 24 Ore, and many other respected finance publications.

See the full archive of Adrian Ash articles on GoldNews.

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