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Gold Bullion Steadies from Fed Minutes Fall, Banks Tip Commodities vs. Inflation

GOLD BULLION rallied just $3 off a 1-week low versus the rebounding Dollar on Thursday as world stock markets fell after notes from the Federal Reserve showed the US central bank expects to keep raising its key interest rate in 2018.
 
China’s stock market opened sharply higher on the first trading day of the new Year of the Dog, but Hong Kong fell hard with the rest of Asia.
 
Shanghai’s gold market returned to find global wholesale bullion prices $10 lower from before the Chinese New Year holidays, down at $1324 per ounce.
 
The Shanghai gold premium – offered for metal shipped into the world’s No.1 consumer nation – held around $6 per ounce, one-third below the typical average.
 
European equities also dropped after Wall Street “nosedived” overnight following the release of the Fed’s January meeting minutes, widely read as “pointing to more rate hikes ahead.”
 
“Almost all participants continued to anticipate that inflation would move up to the Committee’s 2.0% objective,” the Fed minutes said, calling “economic growth above trend” and the labor market “strong”.
 
With inflation rising, “bond prices are likely to fall [further] and equities are looking heavy,” says a new report from commodity-broking Australian bank Macquarie, advising that “an allocation to commodities [is] likely to add significantly to a balanced portfolio.”
 
Chiming with analysis from US investment bank J.P.Morgan earlier this week, “Much of the focus is on the benefits of precious metals as an inflation hedge,” says Macquarie, “[but] gradually increasing inflation is also supportive for the industrial commodity complex.”
 
Rather than falling alongside stocks and bonds, “We expect the correlation between commodities and equities, as well as [between] commodities and bonds, to be very low,” the report concludes.
 
Chart of commodity basket's correlation with stocks and with bonds. Source: Macquarie
 
“When inflation is higher and more volatile, as it was in the 1970s,” says analysis from $2.4 trillion asset management giant Fidelity, “the correlation between stocks and bonds increases, because rising inflation negatively affects the performance of both.
 
Alongside commodities, short-duration bonds, real estate, and natural-resource producer stocks, Fidelity adds, gold bullion “has historically been viewed as a store of value relative to paper currencies, which tend to lose value when inflation rises.”
 
With gold falling as bond yields spiked Wednesday, gold’s negative correlation with longer-term interest rates reasserted itself after breaking down in 2018 to date from the strongest inverse relationship in a half-decade.
 
“There’s no way we can afford higher interest rates with this massive budget deficit,” says long-time US asset manager and equity bear David Tice.
 
“Right now one should be concerned with return of principle, not a return on it,” he told CNBC in an interview after the release of the Fed’s minutes on Wednesday.
 
“I think cash, as anaemic as those interest rates are, is a good place to be…I do believe that gold [bullion] and gold stocks represent a phenomenal asset choice.”
 
Silver prices meantime extended the overnight drop and Thursday bounce in gold bullion, rallying 0.6% from 2-week lows against the Dollar to trade at $16.50 per ounce.

Gold Prices 'Hit by Deep Link' to Real Yields But 'Should Gain' on Inflation

GOLD PRICES struggled to recover from yesterday’s sharp drop against the rallying US Dollar in London on Wednesday, halving last week’s 2.2% gain as world stock markets fell, bond prices steadied and commodities edged higher.
 
Retreating 2.6% from last Friday’s 3-week high at $1361 per ounce, the gold price in Dollar terms has now cut its 2018 gains to date to just 2.2%.
 
Priced in Euros and Sterling gold bullion continues to trade below its New Year opening.
 
Japanese Yen gold prices have slid 2.6% since 1st January.
 
“Inflation has come and it should be good for commodities,” reckons US investment bank and London bullion market-maker J.P.Morgan in a new report.
 
“In fact, metals both base and precious exhibit their best performance (both outright and volatility-adjusted) when inflation has reached the Fed’s 2.0% target and continues rising.”
 
But signs of stronger-than-expected US inflation are widely blamed for driving bond yields higher, and rising interest rates have historically forced gold prices down notes Vivek Dhar, mining and energy analyst at Commonwealth Bank in Australia.
 
After a break in this connection not seen in almost a half-decade on BullionVault’s analysis, “Tuesday’s price move hints at that relationship being revived,” says Dhar, pointing to the stronger link between gold prices and the interest rate offered on longer-term bonds after accounting for inflation.
 
“Gold prices and 10-year US real yields have historically had a tight inverse relationship, which is much stronger than the inverse relationship between the US Dollar and gold prices.”
 
Chart of real 10-year US Treasury bond yields vs. Dollar gold prices. Source: St.Louis Fed
 
The resurgent Assad government of Syria – currently conducting a “catastrophic” bombing of rebel-held Eastern Ghouta – meantime accused neighboring Turkey of “a blatant violation of Syria’s sovereignty” on Wednesday over Ankara’s strikes against separatist Kurds in the Afrin region.
 
Turkish President Recep Tayyip Erdoğan dismissed the matter, saying that the issue of his troops – part of the Nato alliance but actively fighting forces backed by the United States – having to deal with pro-Assad soldiers was “closed for now” after they fired warning shots at an approaching division.
 
Leaked documents from the UK Government in London showed Wednesday that Conservative Prime Minister Theresa May wants a transition period of at least 2 years between March 2019’s Brexit deadline and actually leaving the European Union, longer than the EU is currently offering.
 
Pro-Brexit lobbyists the European Research Group – led by Conservative backbencher Jacob Rees-Mogg – meantime demanded “full regulatory autonomy” for the UK immediately on Brexit Day, with the right to start signing so-called “free trade” deals with non-EU states. https://www.thesun.co.uk/news/5628762/cabinet-stuck-in-deadlock-over-whe…
 
UK exports of gold – out of stockpiles held in the global trading center of London – last year rose almost 10% as imports fell 41% by weight from 2016’s series record.
 
January 2018 saw Swiss exports of gold bullion to Hong Kong and mainland China rise 70% from the same month last year according to analysts at Germany’s Commerzbank, jumping as retailers prepared for the key Chinese New Year gift-giving and holiday shopping.
 
New e-commerce channels are extending the reach and sales of jewelry retailers in the world’s No.1 gold consumer market, reports the Nikkei newspaper.

Gold Prices Find 'Support', Silver 'Improving' as 40% of GLD Held by Institutional Investors

GOLD PRICES rallied from a brief dip below $1340 per ounce in London trade on Tuesday, rising against a firm US Dollar as New York traders returned from the long Presidents Day weekend.
 
With China’s markets still closed for the New Year of the Dog celebrations, Asian stock markets closed lower while European equities edged higher.
 
Benchmark UK Gilt yields rose above 1.60%, up near their highest since April 2016, as the British Pound fell back below $1.40 against the Dollar – an 18-month high when reached in late-2017 and a level last seen before the mid-2016 shock Brexit referendum result.
 
Offering what he called “reassurance” over the UK’s March 2019 exit from the European Union, the Government’s chief negotiator David Davis today said the country won’t be “plunged into a Mad Max-style world borrowed from dystopian fiction.”
 
Platinum prices meantime held and rose above $1000 per ounce
 
Silver rebounded 1.1% to regain last week’s closing level at $16.66 per ounce.
 
“With China still on leave,” says the latest trading note from Swiss refining and finance group MKS Pamp, “there was little interest in Asia to stop bullion moving through the recent support level of $1345.
 
“[But drops] remain shallow…[and] should we see further Dollar appreciation, expect to see support broadly around $1330-35.”
 
With the bulk of end-2017’s regulatory filings now complete, latest data say that the largest exchange-traded gold proxy – the SPDR Gold Trust (NYSEArca:GLD) – ended last year with institutional and fund investors holding 40% of its shares, the largest proportion since the Brexit referendum shock of mid-2016.
 
Chart of institutional vs. private investor holdings of SPDR Gold Trust (NYSEArca:GLD). Source: BullionVault
 
That contrasts with the largest silver ETF, the iShares Silver Trust (NYSEArca:SLV), which had 16.3% institutional ownership at end-2017.
 
“Silver crossed below the lower level of the Ichimoko cloud,” says a technical analysis from Belgian refining group Umicore.
 
“The next stop might be the support level at $16.35 or the current annual low at $16.13.” 
 
But this is only “a limited pullback,” counters technical analyis from French investment bank Societe Generale, “[and] $16.38-16.20 should contain it.”
 
“Demand and supply fundamentals are improving,” adds SocGen bullion market analyst Robin Bhar, “and we expect demand to exceed supply in 2018, primarily driven by a significant shortfall of primary mine production (down 10%).”
 
“People are scratching their heads wondering why silver isn’t picking up along[side] gold,” says exchange-traded trust fund provider ETF Securities’ Maxwell Gold.
 
“[But] rising global growth is going to have a much bigger impact on silver going forward.”

Comex Silver Speculators Turn Net Bearish, Gold Prices Steady as Russia, Turkey Warn US Over Syrian 'Fire'

GOLD and SILVER PRICES remained steady on Monday morning in London against a rebounding US Dollar, write Steffen Grosshauser and Adrian Ash at BullionVault.
 
With New York shut for Presidents Day – and ahead of meeting minutes due Wednesday from the US Federal Reserve’s latest policy meeting – global equity markets were mixed as non-US government bond prices fell once more, nudging interest rates higher.
 
Oil prices hit their highest level in nearly two weeks after Saudi Arabia’s energy minister Khalid Al-Falih said producer nations should keep output cuts in place for the whole of 2018 even if that causes a small supply shortage. 
 
Geopolitical tensions meanwhile increased as Russia – the world’s third biggest gold producer – warned the US not to “play with fire” in its “provocative” support for autonomy-seeking Kurds in Syria.
 
Just missing a 4-year weekly closing high on Friday, gold prices started this week at $1346 per ounce.
 
Also firm against the Dollar, silver prices edged higher for UK and Euro investors on Monday.
 
But in contrast to gold’s 3.4% rise for 2018 so far however, silver prices remain almost 1.8% below their New Year 2018 level at $16.66 per ounce.
 
Latest data from US regulators also show speculators turning net negative on the metal in their derivatives betting last week.
 
Chart of Managed Money net betting in Comex silver futures and options, tonnes equivalent. Source: BullionVault via CFTC, LBMA
 
The CFTC’s silver figures say that hedge funds and other Managed Money speculators cut their bullish bets on Comex futures and options and raised their bearish bets as a group in the week-ending last Tuesday.
 
Together that took their net speculative position back into negative territory for the first time so far in 2018.
 
The Managed Money category has been bearish overall on silver in 34 of the 609 weeks since current records began in 2006.
 
That compares with 21 weeks of net bearish betting on platinum and just 12 on gold, which last saw net negative Comex betting by money managers in the first week of 2016.
 
Platinum today further extended its gain above $1000, rallying to a 3.5-week high at $1013 per ounce.
 
Sister metal palladium meantime stayed firm, trading up to $1050 per ounce after its recent 15% correction.
 
Now fighting against Kurdish separatists inside Syria, the government of Washington’s fellow NATO member Turkey – the world’s 5th largest gold buying nation – said at the weekend it’s giving the US “another chance” over its support for a 30,000-strong border protection force in the northeast of Syria.
 
The US meantime said it’s investigating an attack on its Kurdish allies apparently involving Russian mercenaries.

Gold Prices Near 4-Year Weekly High as $4 Trillion of US Debt Faces Bond Market

GOLD PRICES neared their highest weekly finish against the Dollar in almost 4 years on Friday, trading 3.0% up for the week as the US currency extended its drop on the FX market.
 
Friday morning’s benchmarking auction in London set the highest AM gold price since late January’s 17-month high, finding a balance of buying and selling demand at $1358.60 per ounce.
 
An afternoon LBMA Gold Price above $1354.25 would mark bullion’s highest weekly finish in US Dollar terms since mid-March 2014.
 
Back then, 10-year US Treasury yields stood at 2.65% against today’s level of 2.88%
 
Two-year yields, in contrast, have jumped from 0.36% to 2.19% in nominal terms, taking shorter-term Dollar interest rates to their highest in almost a decade.
 
Adjusted by inflation, real 2-year rates have risen from minus 1.2% to nearly 0% on the latest US consumer-price index.
 
Only one month since 2012 has seen gold prices avoid a drop from four years’ previously when real 2-year US Treasury yields rose one percentage point or more across the same time-frame.
 
(Read more about the typical, traditional link between gold prices and bond yields here.)
 
Chart of gold price vs. 10-year and 2-year US Treasury bond yields. Source: St.Louis Fed
 
Holding strong on Thursday despite the start of the Lunar New Year holiday in No.1 gold-consumer nation China, the volume of gold matched at London’s PM benchmarking auction has so far this week beaten January’s daily average by almost 25%.
 
January’s average daily volume was already the strongest since Donald Trump’s election victory of November 2016 according to data from the process’s independent administrators IBA.
 
January saw London’s afternoon benchmark gold price set its highest monthly average since August 2013 at $1345 per ounce.
 
Outside the Dollar however, gold prices continued to hold near the lower-end of their recent ranges on Friday, rising to only £966 for UK investors and adding 1.3% for the week in Euro terms to €1088 per ounce.
 
“Can bond markets digest the huge supply of US Treasuries that will be issued this year?” wonders investment director Anthony Doyle in a blog at UK asset management giant M&G.
 
“The US government will have to rollover 28% of its total debt in 2018, equivalent to over $3 trillion in US Treasuries.
 
“In addition, some estimates suggest that the US federal budget deficit is on track to rise to over $1 trillion in 2019.
 
“With the Trump fiscal expansion plans likely to be funded by the issuance of short-term debt, the next few years will see a large increase in US Treasury supply.”

Gold Bullion Touches 'Hurdle at $1356' as Dollar Falls, Tokyo Equities Join Correlation Break

GOLD BULLION hung onto four-fifths of its sharpest 1-day gain since August in London trade on Thursday, holding firm as world stock markets rose again despite longer-term US interest rates holding at multi-year highs after yesterday’s inflation data beat Wall Street forecasts.
 
The Dollar fell again, with the single currency Euro briefing touching $1.25, just shy of end-January’s 3-year high.
 
Snapping a typically strong inverse relationship with interest rates on US bonds, Dollar gold prices have now gained 19.9% even as 2-year Treasury yields have risen one whole percentage point from the start of 2017.
 
Tokyo’s stock market also broke a typically strong inverse correlation on Thursday, rising sharply despite a fresh 14-month high in the Japanese Yen’s exchange-rate with the Dollar.
 
US stock markets opened higher, extending yesterday’s post-inflation data surge, but European equities cut their earlier gains for the day back to 0.7%.
 
“The Yen, which no-one is focusing on, makes me more nervous,” says the ever-gloomy Albert Edwards, strategist at French investment bank Societe Generale.
 
“Huge speculative Yen shorts have been accumulated at a technically important moment,” says Edwards.
 
“That makes it far more likely the Dollar will fall and the Yen quickly surge” now that a multi-year uptrend in the Dollar’s Yen value has been broken at the ¥107.9 level.
 
Priced in the Yen, the US Dollar fell Thursday beneath ¥106.4, down some 5.7% for 2018 so far.
 
Bets on US Fed interest rates rising 4 times or more to end 2018 at 2.25% or above have now swollen by one-third from this time last month, totalling over 6-in-10 of all speculative bets according to data from futures exchange the CME.
 
“Kissing this downtrend [in 10-year US bond yields] has typically been very bad news indeed for equity markets,” says Edwards at SocGen.
 
Chart of 10-year US Treasury yields 3-decade decline. Source: SocGen via ZeroHedge
 
“Whatever the arguments are in favour of tax reform in the US (and there are many),” Edwards adds, blaming Donald Trump’s new budget for worsening the inflation scare and sell-off in bonds, “this is probably the singularly most irresponsible macro-stimulus seen in US history.
 
“To say it is ill-timed and ill-judged would be a massive understatement.”
 
With the US Dollar falling again Thursday, the price of gold touched 3-week highs at $1356 per ounce but slipped in terms of other currencies.
 
The UK gold price in Pounds per ounce retreated £5 from Wednesday’s spike to 1-month highs above £968.
 
Gold priced in Euro terms fell €5 from its highest since 25 January at €1090 per ounce.
 
Closing “sharply higher” on Wednesday, Dollar gold prices now face “new resistance at $1357.60, the September high,” says the latest technical analysis from bullion bank Scotia Mocatta‘s New York office.
 
“Gold has tested the overnight high of $1355 a couple of times,” says Swiss refiner MKS Pamp’s Asian trading note, “[but] volumes are pretty thin with [Shanghai] closed for Chinese New Year.
 
“On the topside, a break above yesterday’s New York high should see the metal testing the January [intraday] high at $1365.”
 
“[After] gold failed to confirm the [longstanding and potentially bullish] multi-year inverse Head and Shoulders [pattern] at $1356,” says a note from Albert Edwards’ technical analysis colleagues at SocGen, posted before Wednesday’s inflation-data spike, “it has started staging a recovery and has crossed above a descending trend.
 
“The next hurdle [still comes] at $1356.”

Start of Chinese New Year Holiday See Gold Bullion Whip on US Inflation Data, Turkey Threatens 'Ottoman Slap'

GOLD BULLION prices fell as the Dollar jumped on stronger-than-expected US inflation data Wednesday, only to recover the drop as fixed-income bond prices fell, pushing longer-term interest rates higher once more.
 
World stock markets also sank and then rallied on the news, with Germany’s Dax regaining a previous 1.0% loss by mid-afternoon in Frankfurt.
 
Gold priced in non-US currencies also spiked lower and then higher, with the cost of bullion for UK investors and Euro buyer setting new 1-week highs above £961 and €1080 per ounce respectively.
 
The official US Consumer Price Index rose 2.1% in January from the same month last year, beating Wall Street forecasts but coming substantially below the 6-year peak hit last February at 2.8% per annum.
 
Chart of gold price year-on-year change vs. US consumer-price inflation rate. Source: St.Louis Fed
 
China’s stock market had earlier risen into the long Lunar New Year holidays, with the Shanghai Shenzen CSI300 index closing the Year of the Rooster some 15.9% higher.
 
That was over 9 percentage points lower however from last month’s 2.5-year high.
 
The US Dollar had already extended its rally ahead of today’s inflation data, hitting a near 3-week high versus the Chinese Yuan overnight to trade 1.6% above last Wednesday’s 2.5-year low.
 
That drop in the Yuan helped curb the premium for gold bullion delivered in Shanghai around $6 per ounce above quotes for London settlement, lower by one-third from the typical incentive for new imports into the world’s No.1 consumer nation.
 
Like the Chinese stock market, the Shanghai Gold Exchange will now stay closed until next Thursday.
 
Household demand, meantime, is likely to see its peak for the year with gift-giving as well as investment purchases of gold bullion bars and coin.
 
“The upcoming Chinese New Year holiday will remove physical demand from the [wholesale] market,” says Swiss refinery group MKS Pamp’s trade Sam Laughlin, speaking to Reuters.
 
“Faster-than-expected inflation pressures would likely persuade higher policy rates across key central banks,” says economist Barnabas Gan at Oversea-Chinese Banking Corp. in Singapore to Bloomberg.
 
“[That will] pressure prices lower, rather than lift gold’s status as an inflation hedge.”
 
The government of Turkey is meantime “in no doubt” that the US wants Greece to attack Turkey, claimed President Recep Tayyip Erdoğan’s advisor Yigit Bulut today.
 
For Greece, it would be like a “fly picking a fight with a giant.”
 
After Turkish warships blocked an Italian oil rig from exploring for natural gas near the divided island of Cyprus, Turkish coast-guard ships on Monday rammed Greek coast-guard ships near the islets of Kardak, just off the Turkish resort of Bodrum.
 
Warning the United States to cease its support for Kurdish fighters in Syria on Tuesday, “It is clear [they] have never experienced an Ottoman slap,” Turkish President Recep Tayyip Erdoğan told his Justice and Development Party (AKP) in parliament.
 
The Lira today edged higher against the Dollar from last week’s 2-month lows, curbing gold bullion prices in the world’s 5th largest consumer nation some 2% below last month’s revisit to November’s fresh all-time record highs.
 
Gold priced in Turkish Lira has risen 5-fold over the last decade as the currency has lost 70% of its US Dollar value.
 
India meantime does not “really need to do tit for tat” with Pakistan forces, said a senior officer today, after the weekend’s attack on its camp in Jammu saw terrorists crossing the disputed border kill 6 soldiers and a civilian in a two-day gun battle
 
“We plan our strategy and we will continue with this.”
 
Allowing for the world No.2 consumer nation’s 10% import duty, wholesale gold premiums in India’s key hub of Ahmedabad today held at $1 per ounce above comparable global quotes says data from the NCDEX exchange.
 
That marked the 11th trading day in succession without dipping to a discount, the longest run of 2018 so far.

Gold Price Gains vs Falling Dollar as Trump's 'Desolation' Budget Leaves GLD Investors Cold

GOLD PRICES rallied again versus the weakening Dollar in London trade on Tuesday, briefly touching $1330 per ounce as the US currency extended its losses after President Trump sent his 2019 fiscal plan to Congress for approval. 
 
“After so stupidly spending $7 trillion in the Middle East, it is now time to start investing in OUR Country!” tweeted Trump on Monday.
 
With the US military this month launching its First Security Force Assistance Brigade to “train, advise, assist, enable and accompany” government forces in Afghanistan, US forces attacked by Russian mercenaries in Syria last week killed perhaps 100 opponents and wounded 200-300 more, Bloomberg News quotes various sources.
 
Russian news agency Kommersant says that friends and family of 4 staff from private military company Wagner confirmed their deaths.
 
The giant SPDR Gold Trust (NYSEArca:GLD), the world’s largest gold-backed exchange traded trust fund vehicle (ETF), meantime ended Monday unchanged in size, needing fewer than 821 tonnes of gold to back its outstanding shares – the lowest level since end-October.
 
Chart of SPDR Gold Trust (NYSEArca:GLD) bullion backing. Source: ExchangeTradedGold
 
Releasing his latest Budget plan on Monday, Trump has now “given up” his hope of balancing US federal spending with tax revenues before 2028 according to the Wall Street Journal, quoting a key White House source.
 
“Combined with a newly passed spending deal and sweeping tax cuts, the [new 2019] budget would see the [annual] federal deficit once again rising past $1 trillion in the near-term,” says Fox News.
 
“Trump’s budget statement calls deficits the harbingers of a ‘desolate’ future,” says the New York Times, “but the White House plan would add $7 trillion to the deficit over the next 10 years.”
 
With the Dollar falling again on Tuesday, the Euro reached 1-week highs above $1.23 while the Japanese Yen extended its surge towards September’s 10-month highs.
 
That held the gold price in Japanese Yen down near Friday’s drop to 8-week lows beneath ¥4,600 per gram.
 
With 2 days until China’s financial markets shut for a week of Lunar New Year holidays, gold prices in Shanghai meantime traded just $5.75 per ounce above comparable London quotes.
 
Reflecting demand and supply in the world’s No.1 gold consumer nation, that incentive for new imports was barely two-thirds of the average premium for Shanghai gold.
 
Over the last month, the premium has averaged just half what it averaged over the month preceding Chinese New Year 2017.
 
Shanghai’s CSI3000 stockmarket index meantime followed Wall Street higher overnight, rallying 1.2% while Hong Kong equities added 1.3% on Tuesday. 
 
Japan’s Topix fell 0.9% however, down for the 10th session in 14, while Eurozone equities lost 0.6% on average by lunchtime in London.
 
India was closed for the Mahashivratri festival.
 
Ten-year US Treasury yields edged lower once again from 2.87% – retreating from that 4-year high for the 6th time in 7 sessions – while UK Gilt yields pushed higher after new data said that consumer-price inflation in the world’s 5th largest national economy again held just shy of November’s 5.5-year high of 3.1% per annum in January, with a “continued upward effect…from all categories of goods and services.”
 
Last week the Bank of England kept its key UK interest rate unchanged at a near all-time low of 0.5% with its QE stimulus asset purchases at a record high of £445bn.
 
The UK gold price in Pounds per ounce rose this morning above £956, touching 1-week highs.
 
Tomorrow brings inflation data from the US and Germany, plus end-2017 economic growth data from Germany and Japan.
 
Gold priced in the single-currency Euro today held flat from last week’s finish at €1075 per ounce.

Spot Gold Up after 'Margin Calls' as Investors Await Trump's Spending Plan and Inflation Data

SPOT GOLD bounced back on Monday morning in London as the US Dollar declined after last week’s rally while investors wait for US President Trump’s spending plan and inflation data, writes Steffen Grosshauser at BullionVault.

Gold Prices started the week by rallying from $1316 to $1319 per ounce after their second consecutive weekly decline, while the greenback weakened against its major counterparts.

Markets were looking at President Trump’s infrastructure plan and the US consumer price data due this Wednesday for signs on inflation and the likelihood of further interest rate hikes. Concerns over rising inflation and the second shutdown-mode of the US government within three weeks were blamed for the global equity plunge last week.

Asian and European stocks rose higher this morning, with the pan-European Stoxx 600, the UK’s FTSE and Germany’s Dax all rising more than 1%. But traders remained nervous following the highest volatility in equities since 2015 which wiped off $1 trillion in market capitalisation. The Cboe Volatility Index jumped three-fold during the market turbulences.

Crude oil, meanwhile, rebounded after its biggest weekly decline in two years.

President Trump is expected to unveil his long-awaited $200 billion infrastructure spending plan today – including the funds to construct a wall along the border with Mexico. Although the plan is meant to boost US economic growth, his opponents criticise that his budget proposal will drop his party’s goal to balance the budget in the next 10 years.

“The story is and will be about US monetary policy and dollar direction,” said Swiss private bank Julius Baer’s analyst Carsten Menke. “US growth is more solid, wages are rising and the worry is the Fed will be forced into more rate hikes than currently expected.”

“The uptick in [gold] prices today is not so much safe-haven buying, but more so potential short covering behaviour by market watchers,” said Singapore-listed bank OCBC’s analyst Barnabas Gan. “It’s just common sense for some portfolio managers to exhibit some short-covering behaviour especially after the sell-off we saw last week.”

“People position long gold ahead of a stock market correction, and not necessarily buying gold after a stock market correction,” said online broker Blue Line Future’s President Bill Baruch. “And because of that, after a correction, people have to rebalance their portfolios; assets come out of gold in order to meet margin calls in stocks.”

Although last week’s volatility in global stock markets did not reflect in rising gold prices, Vertical Research partner Mike Dudas on CNBC’s “Futures Now” predicts gold’s return to its status as a safe haven as “volatility returns and erratic moves become more commonplace”.

“Give it a little bit of time. We’ve just come off a tumultuous last four or five days in the equity markets and everything’s getting re-based. […] As things settle down and we get much more volatility in the marketplace, I think gold is going to find a bid,” he added, forecasting an upside target of $1355 and a year-end price of $1400.

However, spot gold could hit resistance at $1325 and $1330 per ounce before dropping back to its 8 February low at $1306, reckons Reuters technical analyst Wang Tao.

In other metals, silver slightly rose from last week’s close at $16.37 to $16.42 on Monday, whereas platinum rose 0.7% just to drop below Friday’s close at $965 and palladium traded sideways around $985 after falling to a 3-month low last week.

Hedge funds and other large speculative investors decreased their net-long position in all precious metals the day after global stock markets plunged and the Dow experiencing its biggest point drop in history.

The net-long position in Comex gold was cut down by almost 11% in the week to 6 February – the first drop in eight weeks, according to data published by the US Commodity Futures Trading Commission (CFTC) on Friday.

The non-commercial speculator positions on Comex silver also fell, bringing the overall level to the lowest in six weeks.

Holdings for the world’s largest gold-backed ETF, the SPDR Gold Trust (NYSEArca:GLD), were reduced to 820 tonnes, the lowest volume since the end of August.

Dollar and Yen Up, Gold Price 'Targets $1300' as Stockmarket 'Carnage' Worsens

GOLD PRICES steadied against the rising Dollar on Friday but headed for the 3rd weekly loss of 2018’s six weeks so far at $1315 per ounce amid what traders called “carnage in the stock market.”
 
Gold prices in all other major currencies bar the Japanese Yen held firm for the week, rising in Sterling and Euro terms.
 
UK and Eurozone government bond prices also rallied on Friday, nudging longer-term interest rates lower.
 
US Treasury bonds fell back however, pushing 2-year yields back up to 2.14% – just below the 10-year highs reached last week – while 10-year yields touched 2.86%, some 30 basis points higher from this time last month.
 
Speculative betting on the US Fed raising its key overnight interest rate in 2018 has, in contrast, barely changed over the last month.
 
Giant gold-backed exchange-traded fund the SPDR Gold Trust (NYSEArca:GLD) saw more shareholder liquidation on Thursday, pulling the amount of bullion needed to back the value of its shares in issue down to 826.3 tonnes, some 2.7% smaller from 2 weeks ago.
 
“US funds captured 73% of global [gold ETF] inflows during January,” says a note from market-development organization the World Gold Council today, “reversing the 2017 trend” when European trusts expanded faster.
 
Chart of SPDR Gold Trust (NYSEArca:GLD) bullion holdings. Source: BullionVault via ExchangeTradedGold
 
“I am now bearish gold,” says New York strategist Russell Browne at Canada’s Scotia Bank in a technical note, “targeting the $1300 level.”
 
“On the lower side we should see some support around $1308-10,” counters a trading note from refiner and finance group MKS Pamp’s Asian desk, “[but] a move through there will see the yellow metal testing the psychological $1300 level.”
 
“After a failed attempt to confirm the multi-year [bullish] Inverted Head and Shoulder [pattern] at $1356,” says French investment bank Societe Generale’s technical team, “gold has embarked into a correction and has met a first graphical objective at $1308 representing January lows and mid-October high.
 
“The ongoing correction could extend to November high at $1300.”
 
Gold fell further on Friday against the Japanese Yen – often seen as a ‘safe haven’ currency during periods of stockmarket turmoil – to head for its sharpest 1-week drop since October 2016.
 
Losing another 2.3% on Friday, Tokyo’s Nikkei 225 stockmarket index has now fallen by more than one-tenth from this time last month. So too has Germany’s Dax index.
 
Chinese equities have lost 8.3%, France’s Cac40 is down 8.1% and the internationally-focused FTSE100 in London has lost 8.0%.
 
Gold priced in Sterling meantime rallied £20 per ounce from Thursday’s slump to an 8-week low, made after the Bank of England held UK monetary policy unchanged but forecast growing inflationary pressures and “hinted” at a faster pace of interest-rate rises ahead.
 
The UK gold price in Pounds per ounce touched £954 just before lunchtime Friday in London.