Gold News

Gold & Silver Price 'Surge' Turns Bears 'Neutral' as China Trading Hits Record

GOLD and SILVER PRICES held onto the bulk of yesterday's 5% and 6.5% gains in London trade on Wednesday after rising to 6-week Dollar highs overnight in Asia.
 
Priced in British Pounds, gold touched its August peak at £790 per ounce.
 
Euro gold prices reached the highest level since mid-March, just shy of €1000.
 
Gold trading in China nearly doubled today from Tuesday in value terms, touching last month's new record daily volume in the Shanghai Gold Exchange's main contract.
 
Silver volume was heavier still after what one analyst calls yesterday's "price surge", with contracts worth $3 billion changing hands Wednesday in Shanghai.
 
"Gold closed [Tuesday] above crucial resistance of $1213," says a technical chart analysis from Swiss investment and bullion bank UBS, pointing to the "38% retracement of the July-November bear trade" – a Fibonacci number – and switching its view from "bearish" to "neutral" on silver as well.
 
This week's move also leads commodity analysts at Germany's Commerzbank to "neutralise [their] bearish forecast for now."
 
But gold prices "will need to overcome the 1255.61 October high," they add, "in order to allow for recovery to the 200 day [moving average now] at $1270." it said.
 
What Commerzbank calls "ongoing weakness to $1092 [remains] our longer-term downside target, and we are alert to the idea of reversal here."
 
World stock markets, excepting Japan, meantime rallied from Tuesday's sharp drop, with Shanghai equities recovering half of yesterday's 5% plunge.
 
New inflation data said Chinese consumer prices fell 0.2% last month from October, while factory-gate prices dropped 2.7% from November last year.
 
New UK trade data meantime showed net gold exports totaled 47 tonnes in October, taking outflows from London vaults – center of bullion storage and dealing worldwide – to 288 tonnes so far in 2014.
 
Net outflows from London's Good Delivery vaults were 1336 tonnes by the same point last year.
 
Physical flows, says London market maker Scotia Mocatta in its latest report, will become a bigger determinant of prices because "the gold market is adjusting to a different climate...
 
"No longer are investors particularly worried about the global monetary and financial systems, so the safe-haven interest from the financial market has waned."
 
But while Scotia's analysts feel "it is difficult to get too bullish" until gold finds another "driver" of prices, they think "this is likely to come from a pick-up in physical interest.
 
"Hence we are watching developments in India and China closely."
 
Shares in major Indian jewelry manufacturers and retailers jumped 11% in Mumbai today as rumors spread of further easing in the world No.1 consumer nation's anti-import rules, imposed in 2013 to try and cut the country's huge current account deficit with the rest of the world.
 
Finance minister Arun Jaitley today "ruled out" any new restrictions on gold inflows, but his junior – Jayant Sinha – qualified the jewelry sector's hopes by saying further easing of the remaining rules would be "measured".
 
Last month the ruling BJP government of Narendra Modi ordered the central bank to cease its 80:20 rule on gold shipments, which sparked the imports collapse of late 2013.
 
"Greater availability of gold now the 80:20 rule has been dropped," says Mitsubishi analyst Jonathan Butler, "may impact silver demand negatively" after 18 months of strong Indian sales thanks to consumer substitution.

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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