GOLD PRICES dropped a $5 per ounce rally to $1095 in London trade Monday, retreating within 1.1% of late-July’s half-decade lows against the Dollar as Western stock markets fell to erase the gains made following Friday’s much stronger-than-expected US jobs data.
Major government bond prices also fell, pushing interest rates higher again, as New York’s major indexes dropped almost 1% at the opening to match losses in Eurozone equities.
Edging back to unchanged from last Friday’s 14-week closing low, gold priced in Dollars is on track to drop for the third calendar year in succession, notes CNBC – something not seen since 1998.
Gold fell 5 years running to 1992. It rose 12 years straight from 2001 to 2012.
“Gold prices have been in a bear market since early 2013,” says the latest Metal Matters monthly analysis from bullion bank Scotia Mocatta, “when the Fed first started talking about the possibility of tapering quantitative easing.
“With the talk since QE ended being all about rate rises, we would have thought that the market has all but discounted a rate rise…the opposite of a ‘buy the rumour, sell the fact’ situation.”
After Friday’s jobs data put US unemployment at the lowest since investment bank Bear Stearns failed in spring 2008 at 5.0%, “I do think it makes sense to gradually remove the policy of accommodation that helped get the economy to where we are,” said San Fran Fed president John Williams – widely deemed a ‘neutral’ on the policy-making committee – in a speech Saturday.
But with the Federal Reserve’s inflation target at 2.0% per year, analysis by its own researchers currently puts the odds of consumer-price inflation averaging 2.5% or above over the next 12 months at zero, says a new data series and commentary from the St.Louis Fed.
“Although the macro environment is likely to remain unfavourable to bullion in the near term,” writes Japanese conglomerate Mitsubishi’s analyst Jonathan Butler in his new weekly update, “physical demand in China is robust, leading to some fundamental price support.”
Shanghai Gold Exchange volumes leapt Monday by more than 50% from last week’s average, reaching the highest level so far this month as prices dropped 1.5% against the Yuan.
Volatile price action in Comex gold derivatives then saw this morning’s LBMA Gold Price auction elicit the strongest opening-round demand in 2 weeks at a suggested price of $1092 per ounce, before finding a clearing price at $1095.60 per ounce.
The afternoon auction, however, found only a quarter of that volume at a price just below $1090 – a level not seen since August until Friday’s strong US jobs report.
China added perhaps 14 tonnes of gold to its bullion reserves in October, reports Reuters, citing headline central-bank data.
Again twice the average monthly pace of 2009-2015 – when the People’s Bank reported unchanged holdings whilst apparently accumulating gold through other government agencies such as the State Administration of Foreign Exchange – that addition would have taken Beijing’s official holdings to 1,722 tonnes on Reuters’ maths, the fifth largest behind the US, Germany, Italy and France.
Meantime in India – historically the world’s heaviest gold consumer nation, now vying with China – the run up to today’s festival of Dhanteras “set a positive trend for gold jewellery purchasers for [this week’s] Diwali season,” the Business Standard quotes jewelry retailer director Rajiv Popley, reporting 15-20% sales growth.