GOLD PRICES rose against all major currencies bar the Chinese Yuan on Wednesday, nearing 4-week highs versus a falling US Dollar at $1165 per ounce as crude oil rose to new 18-month highs above $55 per barrel.
The Yuan meantime rose sharply from its new 6-year lows after Beijing raised its key reference rate and global news-wires quoted un-named sources saying that the politburo is “preparing contingency plans” to stem capital outflows, including an order to force state-owned companies to sell Dollars for the Chinese currency.
Beijing’s foreign exchange reserves have sunk to 2011 levels – albeit still the world’s largest at $3 trillion, almost three times No.2 Japan – as the People’s Bank tries to slow the Yuan’s decline, injecting a monthly record of $104 billion into the banking system through its Medium-Term Lending Facility in December alone.
Chinese gold prices were barely changed this morning from Tuesday, but with the Yuan rallying on the currency markets, that widened the Shanghai premium above international quotes to $25 per ounce, some 10 times the typical incentive to new imports.
London’s FTSE100 index meantime edged back from yesterday’s new all-time high and Eurozone equities retreated from a fresh 13-month peak as the Eurostat data agency said consumer-price inflation across the 330 million citizen currency union jumped from 0.8% to 1.1% per year in December, led by 2.5% jump in energy costs and a 2.1% jump in unprocessed food.
Excluding those ‘volatile’ items however, the Eurozone’s ‘core’ inflation rate still moved up from 0.8% to 0.9% per year, the fastest pace since July.
Following Tuesday’s fresh trade war spat between Beijing and US president-elect Donald Trump, “Trump’s actual policy delivery and his stance against China are critical to the Dollar and Yuan direction in 2017,” says Asian FX strategist Ken Cheung at Mizuho Bank in Hong Kong.
“The US is [also] going to remain the key to gold price movements,” says David Govett at bullion brokers Marex Spectron in London, “with eyes on the Fed, the Dollar and of course the incoming president.
“Regardless of your thoughts on him, [Trump] is very unpredictable and…will keep the world on tenterhooks with his every tweet and utterance.
“I believe will give gold a boost from time to time…[but] I see a range trading year for gold [between] $1100-1300…unless something awful happens.”
Separate data Tuesday put consumer confidence in France at the highest in 9 years, while unsecured lending to UK households jumped last month at the fastest pace since 2005 and new orders for UK construction companies grew at the fastest in almost a year, the Markit data agency said in its latest PMI survey.
US factory activity hit a two-year high in December, the Institute for Supply Management said yesterday, while spending on new construction hit the highest in a decade.