Gold News

Spot Gold "Impressive", Adds 9% from New Year But Faces "Renewed Downside" as China Imports Slip

SPOT GOLD prices rallied Thursday afternoon in London, recovering last week's close at $1315 after dropping some 1.5% below Tuesday's new two-month highs at $1325 per ounce.
 
Silver also dipped and rallied, rising 1.3% over lunchtime in London to peak above $21 per ounce – a three-month high when breached Tuesday.
 
Asian equities meantime closed higher on the day, but European stocks fell sharply as New York opened, taking France's CAC40 almost 4% below this month's 6-year highs.
 
Year to date spot gold has gained 9.1%, its best first half since 2010 and beating most major asset classes.
 
Silver has risen 7.3% since New Year, gaining more than 12% from early June's drop near fresh 4-year lows.
 
"While gold's recent rally is impressive," says a note from Swiss bank and London market maker UBS, " we struggle to justify significantly higher prices."
 
New US data today put core inflation at 1.5% annually in May – below the Federal Reserve's stated 2% target.
 
But US jobs growth is "way ahead of schedule," said non-voting Fed member James Bullard, speaking to Fox News.
 
Looking at Wednesday's shock revision to Q1 GDP – negative 2.9% annually after an earlier estimate of 2.6% growth – "I think the market's right to shake it off," Bullard of Wall Street stocks.
 
"I think it's an aberration.The economy actually looks pretty good."
 
Citing the weaker US inflation outlook, "Short-covering [by bearish traders] was a key factor behind gold strength last week," reckons a note from Australian ANZ Bank.
 
"But the physical market is not supportive of higher prices," with "renewed downside" taking spot gold to re-test 2013's three-year lows at $1180 per ounce on ANZ's forecast.
 
Gold imports to China through Hong Kong fell to the lowest level in 16 months at 52 tonnes net of exports, new data said this morning.
 
The Shanghai Gold Exchange's busiest contract ended Thursday at a near-$2 discount to London spot quotes, suggesting ample supply of gold bullion in the world's No.1 producer and consumer nation.
 
"Gold stopped at the weekly trend line resistance line last Friday," says Japanese trading house Mitsui's Singapore desk, noting "four touches on this [downwards] trend line, starting from Oct. 2012."
 
"A close this week above $1330 would favour [a] bullish outcome."
 
Here in London on Thursday, the Bank of England meantime identified rising house prices as the biggest threat to financial stability, imposing new "loan to value" limits on mortgage lenders.
 
The Bank has now held UK interest rates at a record low of 0.5% for more than 5 years.
 
Spot gold priced in British Pounds today dropped and then rallied from £767 per ounce, some 1.8% below Tuesday's peak above £780 per ounce – a 3-year low when reached last November, now marking the top of three rallies in the last 8 weeks.

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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