Gold News

Gold "Stable" as Chinese Yuan's Certain Rise Questioned, Prompts Tip on "Productive Commodities, Not Store-of-Wealth"

Gold held onto Thursday's gains in London trade this morning, heading for the weekend 0.8% below last Friday's record weekly finish as world stock markets slipped.

Commodities also held flat, as did Silver Prices, trading 2.6% down for the week at $18.71 per ounce.

The US Dollar rose against Sterling, Euros and Yen, meantime – helping push the Gold Price in Euros back above €32,550 per kilo.

But the Dollar was outpaced by the Chinese Yuan, which rose to a new record as the People's Bank set its daily fix 0.3% higher from Thursday.

The PBoC announced its new "flexible" policy on Monday, a move widely seen as trying to deflect accusations of export-stealing at tomorrow's G20 summit of leading economies in Toronto.

"Now that revaluation of the CNY has begun," says French bank and London bullion dealer Natixis, "more productive commodities such as energy and base metals should outperform store-of-value commodities such as gold.

"The CNY will presumably be allowed to appreciate very gradually [and so] productive commodities should outperform gold for a variety of reasons," the research team says, citing stronger domestic Chinese demand, and higher oil prices as China's refining capacity becomes able to bear higher Dollar-equivalent costs.

But when the Yuan "appreciated smartly" after its previous de-pegging of five years ago, says Steven Barrow at Standard Bank, "we have to remember that, for the period from July 2005 through to the summer of 2008, the Dollar was a weak currency.

Now the Dollar is strong vs. the Euro, it may still be "worth looking for more Dollar/Yuan weakness. But perhaps an even better idea is to look for a much lower Euro/Yuan rate going forward."

Back in the gold market Friday, "Monday's outside day bearish reversal warning off 1265 remains a concern," says the latest technical analysis from Scotia Mocatta.

In Silver, the bullion bank says, "$18.88 remains a resistance ahead of [last] Monday's high of $19.45."

"Despite repeated setbacks, it is not looking all that bad for investors and speculators who are betting on rising Gold Prices," says Wolfgang Wrzesniok-Rossbach at German refining group Heraeus in Hanau in his weekly report.

"However, fresh investor demand has, at times, eased off," he says, pointing to "much normalised delivery periods" for retail Gold Investment units between one-ounce and one-kilo.

"For the coming weeks we expect a general slowing down [in demand], not least due to the summer recess period. [But] the price of gold should, to begin with, stay reasonably stable."

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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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