Gold News

Gold "Choppy...In No-Man's Land" as Euro & UK Rates Stay on Hold, Traders Await US Jobs Data

Gold fell further against a rising US Dollar in Asia and London on Thursday, holding steady for Euro and UK investors as global stock markets sagged and crude oil extended yesterday's loss.

Silver erased this week's gains-to-date, trading below last Friday's close of $16.24 an ounce.

US and German government bonds pushed higher, but UK gilts fell – nudging yields higher – after the Bank of England made no changes to its key interest rates or £200bn quantitative easing program.

The European Central Bank surprised no one by keeping its bank-lending rate at 1.0%.

"We saw a correction from [Gold's] highs yesterday as people want to wait for Friday's non-farm payrolls data," said Ronald Leung of Lee Cheong Gold Dealers in Hong Kong to Reuters early this morning.

"Fresh economic data ought to help the market gain direction," says a note from Swiss refiners MKS, but "trading is choppy as investors are now cautious after taking damage in the previous correction."

"Gold's status as safe haven will come into play at lower prices," says another Hong Kong dealer. "Overly bearish can be as costly as overly bullish."

By lunchtime in London on Thursday, the Gold Price in Dollars had cut its weekly gain in half, trading at $1105 an ounce to stand 1.9% above last Friday's finish.

Euro and UK investors both saw the price continue to move in the tight range established late Tuesday, holding above €796 and £695 an ounce respectively.

On the forex market, the Euro bounced off a new 8-month low to the Dollar beneath $1.3840.

Sterling recovered half-a-cent from its worst level since mid-October at $1.5800.

"At the moment we see gold in no-mans-land," writes Wolfgang Wrzesniok-Rossbach at German refiner Heraeus in his latest Precious Metals Weekly.

On a technical analysis of the Gold Price chart, says Heraeus head of marketing and sales, consolidation above $1111 an ounce would set "the next targets at $1123 and $1140.

"On the downside, there is good support at $1075 an ounce, and this would again be a good level for industrial buyers to stock up on the metal."

"Gold remains under pressure," notes Leon Westgate at South Africa's Standard Bank, "however it has continued to perform relatively well against the likes of silver and the industrial [base] metals."

Following "exceptional trading volumes" in Wednesday's action, copper futures traded at the London Metal Exchange bounced early today, but remained 16% below Jan.'s 17-month highs.

New economic data meantime showed Australian retail sales, UK house prices and German factory orders all failing to hit analyst forecasts.

"Credit conditions are likely to remain restrictive," said the Bank of England as it held UK interest rates at their record low of 0.5% for the 11th month running.

Only once since 1951 has the Old Lady kept her main rate on hold for longer than 12 months.

"The need to strengthen public and private sector finances will also weigh on spending...The scale and persistence of the fall in output means that a substantial margin of under-utilised resources is likely to remain [and so] inflation will fall below the [2.0%] target."

UK consumer prices have defied the Bank of England's deflationary forecasts since the global financial crisis of 2007-2009, accelerating at a record pace in Dec. even as the UK money supply suffered its sharpest-ever contraction.

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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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