Gold News

Spot Gold Falls, Silver Hits New 2014 Lows Sub-$19 as Strong US Data "Damage" Sentiment

SPOT GOLD prices hit 1-week lows in London Thursday lunchtime, trading as low as $1278 per ounce as the strongest US consumer spending figures since August 2009 followed yesterday's US Fed decision and preceded Friday's key US jobs data.
 
Silver prices also fell, dropping to new lows for 2014 beneath $19 per ounce – a level first breached by the last decade's bull market in February 2008.
 
Spot gold "[had] recovered slightly this week," say French bank Natixis' London analysts, "but dropped again after the Fed reiterated its commitment to continue tapering [its QE asset purchases] despite weak Q1 GDP."
 
"Gold's safe-haven appeal," said one trading desk Wednesday in Europe – now closed for May Day – "continues to erode on any news that points towards an improved US economy."
 
Ahead of Friday's much-anticipated April jobs data, US consumer spending today showed growth of 0.9% in March from a revised 0.5% rise in February, "cementing views the economy ended a dismal first-quarter on solid footing," says Reuters. 
 
"Investors have been hesitant about gold for quite a few weeks now," says a note from Swiss bank UBS.
 
Should Friday's US Non-Farm Payrolls data prove "below consensus" forecasts of 210,000 but fail to "inspire gold higher," says the bank's precious metals strategists, "this would be quite a damaging outcome" for the outlook in bullion.
 
"The Fed has had some success," says fellow London market maker HSBC's precious metals team, "in convincing the market that policy will be kept accommodative...creating headwinds for the US Dollar in the process."
 
While gold prices and the US currency "are historically inversely correlated" as HSBC notes, the Dollar fell alongside spot gold on Thursday, dropping to $1.3885 per Euro but holding above the 2.5-year lows hit in late March.
 
Weak UK money-supply data were meantime trumped by a surge in mortgage borrowing and manufacturing activity, with the British Pound rising Thursday to its highest Dollar value since October 2008 at $1.69.
 
That drove spot gold for UK investors below £760 per ounce – a level first reached four years ago last month.
 
China's main gold markets – trading at a rare discount to the world's spot gold benchmark of London settlement since end-February – were closed Thursday for May Day, and won't re-open until Monday.
 
The Hindu festival of Akshaya Tritiya, marked tomorrow in former No.1 consumer nation India, has for a decade " been promoted in a big way as an auspicious time to buy gold," the New India Express quotes one jewelry shopkeep in Bangalore.
 
But "for the past four to five years, sales have decreased," he says.

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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