Gold News

Gold Prices Back "Below $1220 Ceiling" as US Dollar Rallies, Both "Losing Safe Haven Appeal" as European Stocks Fall, Wall Street Rises

GOLD PRICES retreated after strong US retail sales data on Thursday, falling to 2-day lows at $1217 per ounce as the Dollar rose sharply with New York equities.
 
Dropping 1.8% from Tuesday and Wednesday's 7-week high against the Dollar, the gold price fell less steeply for Euro and Sterling investors.
 
Priced in Dollars, crude oil gave back a rally from new 5-year lows, while European stock markets meantime headed for their fourth daily loss in a row.
 
"The improving US economy [means] the strengthening Dollar will continue pushing gold prices down," says new analysis from French investment and bullion bank Natixis says.
 
Because a stronger Dollar, says Natixis, reduces "the need for gold as 'a safe haven in times of crisis'."
 
US stock markets gained 0.8% at the opening on Thursday – and the Dollar took back half this week's earlier 2% drop against the Euro – as the Census Bureau said retail sales expanded faster than analysts forecast last month.
 
US Treasury debt prices slipped, nudging 10-year yields up to 2.19% per year.
 
Major European government bonds rose, in contrast, knocking Germany 10-year Bund yields down to 0.67%.
 
Looking at the Dollar's earlier drop on the FX market, " We do not understand what could be behind the weakness in the greenback," says the daily commodities note from US brokers INTL FC Stone.
 
"We would have thought that given all [this week's] market turmoil and equity weakness, the Dollar would have been bid higher."
 
But "the moves confirm a trend under way since last year," counters an editorial at FT.com from James Mackintosh, "of the Dollar losing its [own] haven status."
 
Previously bid higher during times of crisis such as late 2008, "the Dollar has [now] become a growth currency," the FT says.
 
Because "investors have bought into the idea that the US economy is set for solid expansion...so signs they might be wrong [mean] both the Dollar and US shares fall together."
 
This week's "sharp drop" in the US Dollar," says a note from the Asian trading desk of refining and finance group MKS, "had earlier "prompted an aggressive rally for goldbreaking through the $1220 ceiling."
 
The top of gold's "daily cloud" says a note from Japanese trading house Mitsui – pointing to a technical analysis tool based on recent highs, lows and price averages – will come "at $1218 from Thursday of this week.
 
"Gold has not traded above the Daily Cloud for 4 months."
 
Wednesday night's "second consecutive attempt and failure to close above the 100-day moving average" says technical analysis from Canadian-based  bullion bank Scotia Mocatta – now at $1235 – "hints to near term resistance around this level."
 
"So long as $1240 is not surpassed," reckons the technical team at Scotia's fellow London market maker Societe Generale – highlighting this May's low – "the downtrend remains intact."

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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