Gold News

Gold drops 1.7% as global equities sink on US economic data

From Chris Mullen at GoldSeek.com...

Gold Prices traded a couple of Dollars higher in Asia on Thursday, but it then began to fall off in late London trade and continued to drop in New York to fall to as low as $659.90 by early afternoon before it bounced back higher in the last hour of trade and ended with a loss of 1.69%.

Silver followed a similar pattern and fell to as low as $12.65 before it rebounded over 1% off its low in afternoon trade and ended with a loss of 1.91%.

The Price of Gold in Euros fell to about €480, platinum lost $3 to $1,315, palladium remained unchanged at $364, and copper rose roughly 4 cents to about $3.61. Gold and silver equities fell over 5% by mid-afternoon, but they then rallied back higher in the last two hours of trade and ended with less than 4% losses.

In the US economy, durable goods orders showed a 1.4% rise in June against 2.0% expected. Initial jobless claims were lower than anticipated for the week-ending last Friday, but new home sales sank, down nearly 7% for the month. The Help Wanted Index also fell.

Friday at 08:30 EST brings second quarter GDP expected at 3.2% and the Chain Deflator expected at 3.4%. At 10AM is Michigan Sentiment for July expected at 91.5.

While some suggested that the Gold Market fell in sympathy with general market weakness, others looked towards the carry trade as the New Zealand central bank raised interest rates to 8.25% on Wednesday night and that encouraged shifts in carry trade positions as evidenced by a strong rally in the Yen on Thursday.

Others pointed to weakening US economic growth that may dampen demand, while still others pointed towards manipulation and blatant price capping to drive prices down especially with options expiring today.

Simple profit taking from the last month's run from roughly $640 to nearly $690 may also have been in order. Whatever the reason, most pundits are quick to point out that sharp drops in the prices of gold and silver as seen in the last two days should be taken as opportunities to add to positions and ride the trend that has only gone up overall for over six years and counting as fundamental reasons to do so have only improved over that time frame.

Those poor economic data and credit worries also sent the Dow, Nasdaq, and S&P dramatically lower and encouraged bond buying that sent the yield on the 10-year under 4.8% for the first time in over two months. The Dow was down over 430 points at one point before it rallied over 100 points from its low of the session, but the major indices still closed with roughly 2% losses.

Oil rose in early trade to as high as $77.24 and topped the Brent crude price for the first time in 5 months in further reaction to yesterday's drop in crude inventories, but it ended the day with a loss of over 1% on concerns over slowing economic growth that may cut into demand. A general flight to cash in all positions also encouraged selling as traders kept an eye on OPEC that my increase production at their next meeting as well.

The US Dollar index fell as the Yen rallied sharply on the unwinding of the carry trade while poor economic data and worries over the credit market also encouraged dollar selling.

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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