Gold News

Gold Gives Back Overnight Gains Before Key US Data, Bernanke Speech; Oil Jumps 4% on Cut to US Imports

The Gold Market gave back an overnight bounce to $808 as the New York opening drew near on Thursday, trading at $802.50 per ounce – just below last night's US close – as oil prices surged more than 4% on news of an explosion in Canada that's cut one-fifth of the United States' daily crude imports.

"Despite the underlying bullish technical signals you can actually see quite a nice double top in the recent Gold Price action," says Phil Smith for Reuters India, "and that is a topping pattern.

"However, volume numbers would not seem to back this up. Volume has been rising not falling."

After Wednesday's 2.5% gain in the US stock market – driven by the promise of "flexible, pragmatic and nimble policymaking" from Fed vice-chairman Donald Kohn – Asian equities leapt higher today, adding 2.4% in Tokyo and more than 4.0% in Hong Kong.

European bourses were late to the party, however, and by lunchtime in London the FTSE100 – along with the Cac40 in Paris and Dax in Frankfurt – struggled to break-even.

US stock futures for Thursday also pointed lower as the price of Treasury bonds – the "safe haven" of choice for institutional investors amid the credit crunch starting in August – rose again despite the fresh surge in energy prices.

The Canadian oil pipelines hit by this morning's explosion carry around 1.9 million barrels per day into the US, according to Reuters. The oil market's jump "is a fast reaction to the accident," says Tetsu Emori, a Japanese trader at Astmax Futures.

"It will be good news for bull players. Oil prices may rise further if the accident is proven as a big supply disruption."

The sideways action in Gold Prices came even as the US Dollar rose once again on the currency markets today. Holding around ¥110, the Dollar pushed the Euro back towards Wednesday's one-week lows at $1.4730, and the British Pound dropped more than two cents to $2.0600 on very weak data from the Bank of England.

New mortgage approvals in Oct. slid by 12% from Sept., the Bank said this morning. All lending to private individuals fell by nearly one-fifth.

UK house prices have also turned lower according to data from Nationwide, the country's biggest mortgage lender. The national average slipped 0.8% to a three-month low in November.

More bad news for Sterling – previously bid higher by forex traders expecting the Bank of England to keep its interest rates at the highest level amongst the G5 economies – then came when the Old Lady said she will inject £10 billion pounds ($21bn) into London's money market with a five-week auction on Dec. 6th.

The BoE usually lends for only one week, and this admission of trouble in London's financial markets – where 3-month interbank lending rates are now at 6.60%, a two-month high – helped the Gold Price in British Pounds recover one-third of this week's sharp fall at £391.50 per ounce.

Gold Priced in Euros, meantime, gained more than 1% to €547 per ounce before slipping back as the New York opening drew near.

Today brings a raft of key US data, including economic growth for the third quarter – forecast at 4.9% so long as Inflation Isn't Allowed to Destroy Q3 Growth – plus New Home Sales for Oct.

Federal Reserve chairman Ben Bernanke will speak about economy this evening at the Chamber of Commerce in Charlotte, North Carolina. Money fled back into US Treasury bonds overnight in anticipation of lower Dollar interest rates when the Fed meets on Dec. 11th.

Sears Holdings Corp., owner of both the Sears, Roebuck and Kmart retail stores, today reported quarterly earnings down 99% compared with Aug. to Nov. last year. The 10-year US bond yield today slipped three basis points to 4.02%.

"The safe haven bid will remain a feature of the fixed income landscape over the short-term," reckons Richard McGuire, fixed-income strategist in London for Royal Bank of Canada.

But with the Consumer Price Index for Oct. rising 3.54% from a year earlier, however, how much longer can bond holders continue to ignore inflation in their panic to find "safety" in Dollar-denominated paper?

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Adrian Ash

Adrian Ash, BullionVault Gold News

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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