GOLD PRICES extended Wednesday’s late Dollar gains in London on Thursday, rising above $1200 per ounce for only the second time this month as the US currency slipped following yesterday’s “no rate hike” decision from central bank, the Federal Reserve.
Despite the ongoing Greek debt crisis, the Euro rose to 1-month highs just shy of $1.14 after Wednesday’s new Fed forecasts said US interest rates will stay lower for longer.
Targeted at 2.0% per year, US consumer-price inflation today came in at 0.0% per year for May, extending 2015’s zero-to-negative readings and missing analyst forecasts.
Greek finance minister Yanis Varoufakis meantime entered the latest meeting with Athens’ Eurozone and IMF lenders saying he would make new proposals to “replace costly discord with effective consensus.”
“There’s not much time left,” says Germany’s central-bank president Jens Weidmann in a string of newspaper interviews today.
“The ball is now clearly in the Greek government’s court.”
“Gold prices reacted positively to Fed chair Yellen’s outlook,” says a note from French investment and bullion bank Natixis.
“The Fed is still looking to raise rates this year, but the path of rate hikes could be less threatening than the market had feared.”
“Amid the run of bad news about the Eurozone,” says the Hong Kong dealing desk at Japanese trading house Mitsui Global Precious Metals, “it is worth noting that speculators have reduced their gross short bets against the Euro [on the curency market] by 30% from an all-time high this year.”
“In fact,” reckons precious metals analyst Edward Meir at US brokers INTL FCStone, “Euro bulls may even use the occasion to boost their holdings further.”
However, Meir adds, “any potential Grexit could be considerably more chaotic than the generally complacent tone evident in the markets [suggests] right now, meaning that the Dollar could find a safe-haven bid, thus pressuring gold in the process.”
For gold, “as for every other market,” said bullion market-maker HSBC Bank’s analyst James Steel to Bloomberg earlier this week, “this Fed rate hike when it does come has already been priced in.”
HSBC’s forex team, Steel went on, “have the view that the Dollar bull market may be in its final phase,” noting that over the last 4 instances of “rising rate cycles…the Dollar tends to pull back” when the Fed first makes a hike.
“I think the Dollar continues to get stronger,” countered trading tipster Dennis Gartman on CNBC today, advising investors to buy gold price exposure in non-Dollar terms by hedging into foreign currencies.
“We’re only in the 3rd inning of a 9-inning ball game. The Dollar can get demonstratively stronger.”
Turnover in Shanghai’s main gold contracts meantime held near 1-week highs on Thursday, but the price ended the day almost level with comparable London quotes, deterring fresh imports into the world’s No.1 producer, importer and consumer market.
On the supply side, mining union leaders in former world No.1 South Africa – now responsible for barely 5% of annual world output – today dismissed the idea of a new “social compact” proposed by bosses, saying “We don’t need schemes. We want the money now.”
Producing 80% of the world’s new mine output at its peak four decades ago, South Africa already suffers “some of the highest cash costs globally,” says consultancy Metals Focus, meaning this month’s wage talks “could have a significant impact” on its output.
Silver out-ran the gains in Dollar gold prices, adding 3% for the week so far.
But while Dollar gold rose to $1202 per ounce, Euro and Sterling gold prices held around unchanged from last weekend.