Gold News

Gold Back at $1800 as China Gets Set for New Year, 'ETFs Support' as Silver SLV Shrinks

GOLD PRICES rallied back above $1800 per ounce in late-London trade Friday after the official US jobs estimate flatly contradicted earlier data showing strong growth for January.
 
Silver meantime cut its loss for the week to less than 25 cents but still showed an 11.0% loss from Monday's 8-year high of $30 per ounce following the call on chatroom Reddit to "squeeze the shorts".
 
Split down party lines, the US Senate voted 51-50 on Friday to move ahead with approving new President Joe Biden's $1.9 trillion American Rescue Plan stimulus.
 
Wednesday's ADP report had said US jobs grew over 3 times faster last month than analysts forecast, but the Bureau of Labor Statistics now says net hiring was in line at just 49,000.
 
The US Dollar fell on the news, losing 0.4% from yesterday's 2-month highs against its major peers on the FX market.
 
US Treasury bond yields also edged down, retreating 1 basis point from Thursday's test of the highest 10-year rate since last March's Covid Crisis at 1.15% per annum.
 
Reaching $1805 per ounce, that saw the Dollar gold price rebound $20 from yesterday's 2-month lows but hold on track for the 4th weekly decline in 5 weeks so far in 2021.
 
"Gold is not without investment support at present," says Jonathan Butler at Japanese conglomerate Mitsubishi, "with ETFs holdings remaining at a high level and speculative futures at around 80% of the all-time high on a gross and net long basis.
 
"Physical demand for gold in China has [also] begun 2021 strongly, with sales of bullion on the Shanghai Gold Exchange rising by 33% in the first 6 weeks of the year despite average local prices being 11% higher."
 
Dollar-equivalent prices for bullion landed in China – the metal's No.1 household consumer – slipped to $5.30 per ounce above London quotes on Friday.
 
But with Lunar New Year holidays starting next Thursday and Valentine's Day a week Sunday, Shanghai premiums set the highest weekly average at $6 per ounce since mid-January 2020, just as the scale and speed of the novel-coronavirus outbreak in central China's Hubei province began to become clear.
 
Shanghai Gold Exchange price premium/discount per ounce vs. London. Source: BullionVault
 
Over in Western bullion-backed trust funds meantime, the GLD and IAU gold ETFs closed Thursday unchanged in size from Friday last week, while the SLV silver trust held on track for its 3rd consecutive weekly expansion, swelling some 9.5% from last Friday with a huge inflow needing 1,783 tonnes of additional backing.
 
Even so, the SLV has still now shrunk 2.7% from Tuesday's new record size, sending 562 tonnes back to the bullion market, some 8.5 days of 2020's global mine output.
 
"Silver appears to have recovered from its momentary spike as excessive pumping by activist retail investors gave way to rapid dumping by more seasoned market participants," says Butler at Mitsubishi. 
 
Back at $26 silver "is now almost back where it started," he adds, "once again demonstrating that this large and liquid market is not one that is susceptible to being squeezed."

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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