Gold News

Spot Gold Touches 2-Week High as Dollar Falls Despite Ukraine Tensions, IMF Urges Eurozone QE, Shanghai Premium Returns

SPOT GOLD for immediate delivery neared 2-week highs Tuesday in London, hitting $1314.30 per ounce but failing to move so sharply outside the US Dollar, which fell on the currency markets despite fresh tensions over eastern Ukraine.
 
"We call for an immediate halt to military preparations which could lead to an outbreak of civil war," the Kremlin said in a statement to Kiev, which earlier claimed to have retaken regional government buildings in Kharkiv from pro-Russia separatists.
 
Western stock markets edged 0.8% back but the spot gold price in Euros slipped below €950, unchanged for the week so far, as the Euro today rose to 1-week highs against the Dollar.
 
The International Monetary Fund today warned that the 18-nation Eurozone faces deflation, and urged quantitative easing money creation from the central bank.
 
"Frankly," ECB chief Mario Draghi said in last week's monthly press conference, "I would like the IMF to be as generous in its suggestions also with other monetary policy jurisdictions, like for example issuing statements just the day before a [Fed] meeting would take place."
 
Tuesday saw the British Pound pushed spot gold 0.7% lower to £781 as it rose on the forex market following stronger-than-forecast UK manufacturing data.
 
China's Yuan currency also rose against the Dollar, reaching a 2-week high but holding 2.5% weaker from mid-January's record high.
 
Any move away from "allowing adjustment" and "a market-determined exchange rate" would raise "serious concerns" in Washington, an un-named Treasury official who apparently gave a press conference by phone is quoted today by Reuters.
 
Re-opening after the Ching Ming bank holiday, the Shanghai Gold Exchange saw spot gold finish Tuesday equal to $1310 per ounce as the Yuan ticked higher.
 
That equated to more than $1.50 per ounce over and above the international benchmark of quotes for London settlement at that time, the strongest Shanghai gold price premium since end-Feb.
 
"Depreciation in the CNY has kept the Shanghai-London price differential [in spot gold] subdued," says ANZ Bank's commodity team today.
 
One week after Beijing unveiled a "mini stimulus" plan, aimed at preserving 7.5% annual growth but financed by debt raised on the bond market, anyone expecting government cash injections will be "disappointed", says an article from official news agency Xinhua today, calling talk of stimulus "misleading".
 
"Many of the factors that supported gold prices in the first quarter [will] dissipate," says Morgan Stanley analyst Joel Crane in a new client report.
 
So "we believe the gold price is set to resume a declining trend," he says, nevertheless raising his average 2014 spot gold forecast by 5% to $1219 per ounce.
 
Physical gold prices as dealt at the London Fix have so far averaged $1292.50 per ounce in 2014.

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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