Gold News

Gold Trading Jumps, Adds 1% in Dollars After US Jobs Data But Hits New 2015 Low in Sterling on Conservative Election Win

GOLD TRADING rose and Dollar prices gained 1% from last week's finish Friday lunchtime in London, edging above $1190 per ounce after US jobs data for April just missed analyst forecasts.
 
The Department of Labor's monthly Non-Farm Payrolls report put the jobless rate down one tick from March at 5.4%, with net job creation of 223,000 – one-fifth smaller than April last year.
 
Gold prices initially spiked over $10 per ounce to touch $1194 in a flurry of trading as the Dollar retreated on the FX market.
 
The Euro rose within 1% of this week's earlier 2.5-month high near $1.14, while government bond prices extended their rally, pulling 10-year German Bund yields down 0.1 percentage point from yesterday's new 2015 high at 0.64%.
 
Gold trading volumes had been "extremely subdued" ahead of the data, one London bullion bank said in a note, with "the distraction of the election result in the UK [also] seeing participants sit back and wait."
 
The Conservative Party surprised pollsters and pundits by winning an outright majority of parliamentary seats.
 
The opposition Labour Party lost 40 of its 41 MPs in Scotland to the nationalist SNP, which now holds 95% of seats north of the border.
 
The Conservatives' ex-coalition partners the LibDems were wiped out in their former stronghold of south-west England.
 
London's FTSE-100 share index rose over 2%, its strongest day since New Year, but gold priced in Sterling lost £15 per ounce at one point, hitting new 2015 lows beneath £763 as the Pound jumped and Gilt yields fell.
 
Trading on the Shanghai Gold Exchange meantime saw metal held in the city's free-trade zone – and dealt for Yuan held offshore – close the week equal to comparable London quotes, but China's main domestic gold contract held stronger, with a small premium of $1.75 per ounce.
 
Gold demand amongst consumers in world No.2 consumer India has remained poor this week, Reuters reports, with local dealers blaming the weak Rupee for keeping prices unattractive to buyers.
 
"I don't think the Rupee will fall [again] drastically," MoneyControl quotes Jamal Mecklai, CEO and founder of FX brokerage Mecklai Financial Services, "but the drivers are indeed dangerous," thanks to the global sell-off in government bonds driving market interest rates higher.
 
The avowedly pro-business BJP government of Narendra Modi has also shocked foreign investors into pulling money out of India's stock market by imposing a retrospective capital gains tax on their profits from Indian assets.
 
The Rupee today hit its lowest level since September 2013, holding 7% above the all-time lows hit that August as the Indian government effectively banned gold bullion imports in a bid to stem India's record current account deficit with the rest of the world.
 
Peaking in 2012-13 at 4.8% of GDP, India's CAD is projected to shrink below 1% of GDP this fiscal year.
 
Widening from 2.6% of GDP when the Conservative-led coalition took power in 2010, the UK's currenct account deficit last year reached a record 5.5% of GDP.

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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