Gold Up, $1242 "Critical" as ETFs Grow, Stockmarkets Bounce, Odds of US Fed Rate Hike Slashed
Tuesday, 10/14/2014 14:25
GOLD hit a new 1-month high just shy of $1238 per ounce as the US stock market opened on Tuesday, rising as world equities rallied from a fresh slump with commodities.
The Dollar rose sharply, as did major government-bond prices, driving market interest rates down.
"Investor focus will lie squarely on the US stock market," reckons one broker's analyst, "where key indices continue to deteriorate on a technical [ie, chart trends] basis."
"Gold's correlation with the S&P500," adds Swiss bank UBS, "remains...persistently negative. [That] assists gold's diversification story."
"The worst is over for gold prices," says Bank of America Merrill-Lynch strategist Michael Widmer, speaking earlier to CNBC and seeing a floor around $1200.
"But I just don't see the steam right now that would bring people back into the market."
The SPDR Gold Trust (NYSEArca:GLD) added a little over 1 tonne Monday to the bullion needed to back its shares, rising from new 6-year lows of 759 tonnes.
Exchange-traded fund specialists ETF Securities data showed their London and Zurich-backed products added 1.5 tonnes Monday – the largest daily addition in over a month, reports Reuters – to reach 118 tonnes.
Silver ETFs in contrast shrank again, with the giant iShares Silver Trust (NYSEArca:SLV) shedding a further 35 tonnes of metal on Monday.
That took the silver
needed to back its shares down to 10,717 tonnes – some 1.5% below end-September's record high.
Silver today failed to match gold's rise, peaking at Monday's 2-session highs near $17.50 per ounce for a rise of 5.5% from last month's new four-and-a-half-year lows.
Crude oil meantime hit new multi-year lows on US and European contracts Tuesday morning, with Saudi Arabia's billionaire prince Alwaleed bin Talal
apparently "astonished" at the Opec oil cartel's lack of concern over the plunge.
With 10-year US Treasury yields now down almost half-a-percentage point from this time last month, "The probability of a rate hike by the Fed by June next year has collapsed in the few days," says one bank's trading desk, noting that interest-rate futures now put the odds of a rise from zero to 0.5% by mid-2015 at barely 1-in-6 versus better than 1-in-4 last Tuesday.
German Bund yields today hit new record lows beneath 0.9% after the worst reading of economic sentiment on the ZEW survey in almost two years.
British gilt yields fell towards 2.0% for the first time since summer 2013 after new data showed UK consumer prices flatlined last month from August, pulling the annual rate of inflation to a 5-year low of 1.2%, while house price rises also badly lagged analyst forecasts on official data.
London's AM Gold Fix set new 1-month highs in Sterling and Euro prices as those currencies fell hard.
Weaker Eurozone debt fell in price, meantime, with Greek yields nudging 7% after Austria's finance minister questioned Athens' ability to join Portugal, Ireland and Spain in exiting its Euro crisis bail-out program.
"Point and figure [chart] targets emphasize the $1245-1248 levels," says Mitsui Asian trading desk, pointing to gold's end-May lows and a Fibonacci retracement of 38.2% from the peak of early August.
That level is also cited as "critical resistance" by technical analysts at Mitsui's fellow London market-makers UBS, Societe Generale and Scotia Mocatta.
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