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Gold Price Slips vs Surging GBP as Brexit 'Set to Be Cancelled'

January 12, 2019
Latest News
GOLD PRICED in the US Dollar showed a 0.5% weekly gain as New York trading began on Friday, holding at $1293 as European stock markets slipped amid a fresh round of political turmoil.
 
“Up until now people have been quite rightly worried about the prospects of no deal” for the UK’s March exit from the European Union, said British foreign secretary Jeremy Hunt to the BBC this morning.
 
“But now there is another possibility coming into sight – actually no Brexit.”
 
France meantime mobilized over 80,000 police officers for a 9th weekend of anti-government protests by the leaderless gilets jaunes movement, with pundits forecasting a repeat of last weekend’s violence in Paris.
 
Silver and platinum prices both held unchanged for the week at $15.70 and $822 per ounce respectively.
 
Palladium traded 2.3% higher at a new record high weekly finish as Bloomberg reported that “prices still aren’t high enough” across the platinum-group metals as a whole to boost new mine output.
 
Euro gold prices today held around €1120 per ounce, on track for the first weekly loss in 6 after finishing last Friday at €1127.
 
The UK gold price in Pounds per ounce meantime sank £10 per ounce to trade unchanged for the week at £1008 as Sterling spiked to an 8-week high versus the Dollar following Hunt’s comments on Brexit.
 
Chart of UK gold price in Pounds per ounce. Source: BullionVault
 
“If the [Prime Minister’s] deal is not voted for [by Parliament next Tuesday],” said a spokesperson for Hunt’s boss Theresa May this morning, “the default position is that the UK will leave without one.”
 
But “I have totally given up. I don’t think Brexit will happen at all,” says online stock-broking entrepreneur Peter Hargreaves, reportedly the second largest donor to 2016’s Brexit campaign behind insurance tycoon Arron Banks.
 
“My view is that it ain’t going to happen,” agrees UK fund manager and fellow Brexit campaigner Crispin Odey, also pointing to the “configuration of parliament” against leaving the EU and now building a bullish bet on the value of the Pound rising as a result.
 
Reportedly making £220m as Sterling plunged on the day of the Brexit referendum result, Odey called it “a fantastic decision by the electorate” before telling clients that autumn “We are now destined to have a recession in the UK as well as inflation” thanks to the Bank of England cutting interest rates in response to the ballot’s shock outcome.
 
“While the UK government has so far ruled it out,” says a note from Dutch bank ING, “it looks increasingly likely that the 29 March Brexit date will need to be pushed back.
 
“The most likely way of doing this would be for the UK to apply for an extension to the two-year Article 50 negotiating period” – a move called “inevitable” by one opposition Labour Party figure on Thursday, but something already ruled impossible by the European Court of Justice, with the remaining 27 member states able to agree to cancelling the UK’s exit entirely, not delaying it.
 
Defeated meantime in the UK High Court today over its key ‘universal credit’ welfare reforms, the UK’s Conservative government is also now scrapping a cap on benefits for families with more than 2 children and delaying the start of new payment systems until 2020 for 3 million recipients.
 
Over in world No.1 gold consumer China, wholesale prices on Friday ended the week more than 2% lower as the Yuan rallied again versus the Dollar.
 
That however pushed the premium for gold delivered in Shanghai to more than $9 per ounce above London quotes – back in line with the typical incentive for new imports with less than 4 weeks until Chinese New Year, the country’s heaviest gold-buying season.
 
Over in India in contrast gold prices today held near 5-year highs in Rupee terms, worsening the plunge in demand so far extending 2018’s drop into the New Year.
 
Reflecting weak demand, over the last 3 years Indian gold prices have traded at a discount to London – after accounting for import duty – more than 75% of the time according to data from the mining industry’s World Gold Council.
 
Over the previous 3 years, India instead saw gold trade at a premium two-thirds of the time.

Gold Bullion Peaks $3 Shy of $1300 as Fed Stresses 'Patience' on 2019 Rates

January 11, 2019
Latest News
GOLD BULLION peaked within $3 of $1300 per ounce early Thursday, just $1 shy of making a new 7-month high, after 4 senior officials from the Federal Reserve said separately that the US central bank will now be “patient” before raising interest rates in 2019, repeating the sudden change in message made by Fed chair Jerome Powell last week.
 
Unlike last Friday however, US stock-market futures pointed down ahead of Thursday’s opening, tracking European equities lower and erasing yesterday’s gain after new data showed price inflation receding faster than expected in world No.2 economy China.
 
A statement from Beijing on the US-China trade talks ending yesterday meantime showed only “modest progress” according to analysts, while the US government shutdown – set to become the longest in history this Saturday – looked set to continue as President Trump failed to make any progress talking with Democrat opponents.

Just left a meeting with Chuck and Nancy, a total waste of time. I asked what is going to happen in 30 days if I quickly open things up, are you going to approve Border Security which includes a Wall or Steel Barrier? Nancy said, NO. I said bye-bye, nothing else works!

— Donald J. Trump (@realDonaldTrump) January 9, 2019

“A patient approach to monetary policy adjustments is fully warranted in light of the uncertainties about the state of the economy,” said non-voting policymaker Raphael Bostic of the Atlanta Fed in a speech Wednesday.
 
“That is what I mean by data dependence.”
 
“The Federal Reserve’s current monetary policy seems appropriate for now,” agreed voting member Eric Rosengren of the Boston Fed, “and [we] can patiently observe future economic developments.”
 
“Because inflation is not showing any meaningful sign of heading above [the Fed’s target pace of] 2%,” added the Chicago Fed’s Charles Evans – also a voting member of the Federal Open Market Committee in 2019 – “I feel we have good capacity to wait and carefully take stock of the incoming data and other developments.”
 
Preceding each of the last nine US economic recessions, a series of Fed interest-rate hikes has also preceded 5 of the last 7 periods of year-on-year losses in US stock markets.
 
Last fall’s plunge in world stock markets saw the price of listed US corporations turn a 17.6% annual gain in August into a 7.9% loss for 2018 by year’s end.
 
Chart of Wilshire stock index (year on year % change, left) versus effective Fed Funds rate. Source: St.Louis Fed
 
St.Louis Fed chief James Bullard – a long-time ‘dove’ and now a 2019 voting member on the FOMC from the January 29-30 meeting – says in an interview published in today’s Wall Street Journal that the Fed “is bordering on going too far and possibly tipping the economy into recession” if it raises again.
 
“We’ve got a good level of the policy rate today…The committee is coming to my view on this.”
 
Newly released meeting notes from the Fed’s December meeting, when the US central bank raised overnight Dollar rates for the 4th time in 2018 to a 10-year high of 2.50%, meantime showed the FOMC swapping the word “expects” for the word “judges” in last month’s policy statement “to better convey the data-dependency of the Committee’s decisions regarding the future stance of policy.”
 
With the US currency falling against its peers on Thursday, gold bullion prices were more muted outside the Dollar.
 
Euro gold prices held in a tight band €2 either side of €1120 per ounce, while the UK gold price in Pounds per ounce crept back above last week’s closing level at £1010.
 
With 77 days to go until Brexit, UK lawmakers continued Thursday to argue over points of order in Parliamentary proceedings, and UK opposition Labour Party leader Jeremy Corbyn called for a general election.
 
Gold bullion rallied meantime for Canadian investors, but held 3% below last week’s leap to November 2016 levels, after the central bank held Loonie interest rates unchanged, saying it wants to see “how the outlook evolves” in 2019.

Dollar Poses 'Biggest 2019 Threat' to Gold Prices as US Deficits Soar

January 10, 2019
Latest News
GOLD PRICES in London wholesale market held unchanged for US Dollar and UK Pound investors on Wednesday but slipped to 1-week lows in Euro terms as world stock markets rallied for a 5th session running.
 
New data today put the 19-nation Eurozone’s jobless rate down at 7.9%, a fresh 10-year low, while No.1 economy Germany reported a larger-than-expected surplus on its trade balance.
 
As the Euro ticked higher against the Dollar on the FX market, the price of large wholesale gold bars edged below €1120 per ounce – a 6-month high for French, German and Italian investors when first reached over Christmas, and 1.5% below New Year 2019’s 19-month peak.
 
Priced in the US Dollar gold bullion held above $1280 per ounce, some 1.5% below last week’s new 7-month high.
 
“Our FX view is for a stronger USD [in 2019], which may present the greatest threat to gold and will at the least limit rallies,” says bullion-bank HSBC analyst James Steel.
 
“[But] further short-covering and builds in [speculative] longs are likely,” he goes on, predicting a 2019 average gold price of $1314 per ounce – some $20 above Steel’s previous forecast.
 
Chart of US Dollar Index (major currencies) vs. gold priced in Dollar (right). Source: St.Louis Fed
 
“The consensus got it wrong all through 2018, calling for Dollar weakness,” agrees HSBC’s head of FX strategy Daragh Maher.
 
“Now they have started 2019 with the same old record playing,” he says, forecasting that the US currency will push the Euro down to $1.10 this year.
 
US President Donald Trump held his first primetime evening TV address on Tuesday to blame Democrat politicians for the partial shutdown of government services because they won’t agree to funding his $5.6 billion Mexico wall plans.
 
Washington is already on track for its first $1 trillion annual deficit between revenue and spending since the 4-year run ending 2012, according to data from the Congressional Budget Office.
 
Last year’s US trade deficit in goods and services meantime matched 2017’s nine-record in just the first 10 months.
 
“The wall will always be paid for indirectly by the great new trade deal we have made with Mexico,” Trump told his fellow Americans.
 
Bloomberg today claims that Trump wants to cut a deal with Beijing in US-China trade talks – which concluded this morning – because he believes the US stock market will then rally from end-2018’s plunge.
 
“Although equity market weakness and a recent Fed shift toward a more dovish and pragmatic stance has provided a short-covering boost [in gold],”
 
“A US-China trade deal will take time to negotiate and Chinese stimulus is unlikely to take hold until later in 2019,” says a note from Canada’s TD Securities brokerage.
 
So for the price of gold bullion bars, “We expect choppy range-bound trading in the near-term, as the greenback remains relatively firm, Fed monetary policy continues to be ambiguous and China/emerging-market economic and currency risks continue to manifest.”
 
Here in the UK meantime, anti-Brexit lawmakers began what they called a series of moves to prevent Britain leaving the European Union with “no deal” in place on Brexit Day, 29 March, defeating the Government in a vote overnight.
 
Jean-Marc Puissesseau, head of key French port Calais, told the BBC this morning that he has “preparing for a no-deal Brexit for 12 months” and will be ready to cope with no changes when Britain leaves the EU on 29 March.
 
Saying he is “shocked” by the “disrespectful” decision of UK transport minister Chris Grayling to spend £100m on diverting ferry services to alternative routes from Dover-Calais,  “We will not check [any] truck more than we are doing today,” Puissesseau said – contradicting his own warnings about how delays resulting from Britain’s exit from the EU will cause rotting food and long tailbacks.
 
The UK gold price in Pounds per ounce today edged back up towards £1010 per ounce, some 2.1% below start-2019’s sixteen-month high.

Gold Prices Fall as GLD Sees 'Profit Taking', Real Yields Rally with Equities

January 9, 2019
Latest News
GOLD PRICES fell below last week’s multi-month closing high against all major currencies on Tuesday, losing $15 for the day in Dollar terms as the US currency rallied and European stock markets finally caught up with the New Year rise in American and Asian equities.
 
“Talks with China are going very well!” tweeted US President Donald Trump as negotiators met again in Beijing to resolve the ‘trade war’ tariffs imposed on each other’s exports in late 2018.
 
Trump’s national security advisor John Bolton was however refused a meeting with Turkey’s President Recep Tayyip Erdoğan, who instead lambasted US comments about Washington’s current alliance against the ISIS death cult in Syria with Kurdish fighters – deemed to be terrorist forces by Ankara.
 
As world stock markets tumbled in December, gold-backed exchange-traded trust fund products saw their fastest growth in 22 months, new data said today from the mining industry’s World Gold Council, itself sponsor of giant gold ETF the SPDR Gold Trust (NYSEArca: GLD).
 
The GLD expanded the most in 15 months as the MSCI World Index sank 7.7% and gold prices rose 5.2%, their fastest pace since the UK’s shock 2016 Brexit referendum result.
 
But with gold prices then setting their highest London benchmark since mid-June at $1292.20 per ounce on Monday, the GLD yesterday saw an outflow of investor cash, trimming the total quantity of gold needed to back its shares now in issue 0.2% from last week’s new 6-month high of 798 tonnes.
 
“[Gold prices] had such a strong year-end, it is not surprising to see some profit taking,” says German bank Commerzbank’s analyst Carsten Fritsch.
 
“[Gold prices] lower in European hours following strength in the US Dollar and higher real US Treasury yields,” says World Gold Council chief strategist John Reade.
 
On a 5-week basis, the real rate of interest offered by 10-year US Treasury bonds – after accounting for market-based inflation forecasts – has moved in the opposite direction to gold prices two-thirds of the time over the last 15 years.
 
Chart of gold prices vs. real 10-yr US Trsy yield (inverted). Source: St.Louis Fed
 
Nominal 10-year yields, before accounting for inflation, last week fell to 51-week lows of 2.56%, but that rate rose back to 2.70% on Tuesday as world stock markets extended their recovery from December’s slump.
 
Speculators have over the last month slashed their view that the Fed will raise overnight US rates once or more in 2019 from 48.4% of all bets to 13.1% according to data from the CME derivatives exchange.
 
Looking at the US-China trade talks, “Any kind of agreement should be bullish for gold,” adds Fritsch at Commerzbank, “because of a stronger Chinese Renminbi.”
 
Also known as the Yuan, China’s currency slipped back to Monday’s opening level against the USA Dollar overnight in Asia, but then rose as gold prices fell in Tuesday’s European trade.
 
Premiums in Shanghai earlier retreated to $7 per ounce, half the incentive to new imports offered last week and back below the typical gap of $9 above comparable London quotes.
 
Next month’s Chinese New Year holidays will mark the heaviest single period for private gold demand worldwide.
 
Gold prices in No.5 consumer nation Turkey today held above TRY 223,000 per kilo – a new all-time record high when first reached last August – as the Turkish Lira fell hard on the FX market following Erdogan’s rebuke to Bolton.
 
The Lira dropped back near last week’s 2-month lows versus the Dollar after the Turkish president called the request from Bolton and White House Secretary of State Mike Pompeo for Ankara not to avoid “slaughter” the United States’ Kurdish allies when US troops pull out of a Syria a “grave mistake”.
 
Likening the Kurdish YPG to radical death-cult ISIS, “If they are terrorists, we will do what is necessary no matter where they come from,” said Erdogan.
 
Legal imports of gold into No.2 consumer nation India “tumbled by a fifth last year” reports Bloomberg “as high domestic prices deterred buyers and local stores remained well-stocked.”

'Patient' Powell Sees Gold Price Gain vs. Dollar, GLD Regains July Size

January 8, 2019
Latest News
GOLD PRICES rose Monday against a declining Dollar following US Federal Reserve chief Jerome Powell’s promise to be “patient” before making any 2019 hikes to interest rates, writes Atsuko Whitehouse at BullionVault.
 
Spot gold prices peaked 0.7% above Friday’s closing level, touching $1295 per ounce but holding dead-flat for UK and Eurozone investors at £1012 and €1128 respectively.
 
The Dollar Index (DXY), a gauge of the currency’s value versus six major peers, declined to a 2-month low despite Friday’s strong US jobs data.
 
While Powell’s comments on Friday saw Wall Street rally hard, they also saw the SPDR Gold Trust (NYSEArca: GLD) – the world’s largest gold-backed exchange-traded fund – expand to its largest size since end-July on investor demand for the ETF shares.
Chart of GLD gold backing. Source: ExchangeTradedGold
 
“The Dollar is weak, aiding gold,” says Yuichi Ikemizu, Tokyo branch manager, ICBC Standard Bank.
 
“Also, Jerome Powell’s views on Friday about the future of interest rate hikes is a bullish factor for gold.”
 
Speaking to the American Economic Association, “There is no preset path for policy,” said the Fed chairman on Friday, contradicting his previous comments that quantitative tightening – the reduction of central bank Treasury-bond holdings begun 12 months ago – is now on “autopilot”.
 
“Particularly with muted inflation readings that we’ve seen coming in,” Powell added, “we will be patient as we watch to see how the economy evolves.”
 
China’s central bank meantime said Monday it increased its gold reserves to about 1,853 tonnes last month, keeping it in 6th place behind Russia among nation-state holders with the first such announcement since October 2016.
 
Chart of China and Russia gold reserves. Source: World Gold Council
 
Monday also saw a fresh round of US-China trade talks start in Beijing.
 
“I think China wants to get it resolved. Their economy’s not doing well,” US President Donald Trump told reporters at the White House over the weekend.
 
“I think that gives them a great incentive to negotiate.”
 
China’s Yuan today headed for its strongest level against the Dollar in a month, rallying despite the monetary easing announced Friday by the PBoC after new data said manufacturing activity is shrinking in the world’s No.2 economy.
 
Over in the UK the British government confirmed next Tuesday as the date of Parliament’s “meaningful vote” on the terms of leaving the European Union on 29 March.
 
Preparing for a “no deal Brexit” if Prime Minister Theresa May’s deal fails to win, the government also today held what it called a “rehearsal” for managing freight traffic on a major road near the key Channel port of Dover.
 
The British Pound edged higher against the Dollar, as did the Euro currency despite data showing German factory orders fell more than expected in November.
 
European stock markets meantime fell 0.6%, failing to join Asian equities in extending Friday’s 3.4% jump in New York’s S&P500 index.
 
Silver prices followed gold higher against the Dollar, nearing a 6-month high at $15.76, while platinum rose to $825 but continued to lag sister-metal palladium, which set a fresh all-time high of $1310 per ounce last week.

Gold Falls $15 from $1300 on Strong US Jobs Data, India Demand to Buy 'Negligible'

January 5, 2019
Latest News
BUY GOLD prices in London’s wholesale market fell $15 from nearly touching $1300 per ounce Friday after new data showed much stronger-than-expected US jobs growth at the end of 2018.
 
Trading down to $1284, gold priced in Dollars still headed for a 0.5% weekly rise, its third consecutive such rise – and the longest stretch since early October’s recovery from sub-$1200 – after the Bureau of Labor Statistics said the world’s No.1 economy added 312,000 jobs in December, 75% more than Wall Street forecast.
 
Average earnings also rose faster than analysts expected, but so too did the number of people looking for work.
 
That nudged the jobless rate – as a proportion of the US labor force – back up to 3.9% from last autumn’s fresh 45-year low of 3.7%.
 
Chart of US unemployment rate (left) vs. year-on-year $ change in gold price per ounce. Source: St.Louis Fed
 
With Dollar prices to buy gold nearing $1300 per ounce in Asian trade overnight, “We believe that there is still room for gold prices to move higher,” says the latest forecast from specialist analysts Metals Focus.
 
“However, over the coming months we expect several headwinds to remain in place…in particular, the Dollar.”
 
The Dollar jumped on today’s US jobs data, knocking the single Euro currency down half-a-cent as longer-term US interest rates jumped in the Treasury bond market.
 
The US currency will retain support until late 2019, Metals Focus believes, from rising interest rates, a weak Euro and the US-China trade war.
 
“The United States Treasury has taken in MANY billions of dollars from the Tariffs we are charging China and other countries that have not treated us fairly,” said President Donald Trump on Twitter today.
 
This week’s news of shrinking Chinese manufacturing activity was joined Friday by news that demand for automobiles in the world’s No.2 economy likely fell for the first time since 1990 last year.
 
The People’s Bank of China today cut the amount of money commercial lenders must keep back from new loans for the 5th time in the last 12 months, trimming the reserve requirement ratio for large banks to 13.5% by the end of January from more than 17% a year ago.
 
New Eurozone inflation data meantime showed a hard slowdown in consumer prices from 1.9% to 1.6% annual growth, while factory costs showed a 0.3% drop in December from November.
 
Prices to buy gold in No.2 consumer nation India fell this week $6 below global quotes, according to Reuters, as retailers faced a dearth of demand.
 
“In physical market demand is negligible,” says one Hyderabad dealer. “Retail consumers are not comfortable with [gold’s] higher prices.”
 
Prices to buy gold with British Pounds or Euros held onto much of this New Year’s jump meantime, trading around 1% higher for UK, French, German and Italian investors from last Friday’s finish.
 
Priced in Dollars however, silver also cut its weekly gain following the US jobs data on Friday, heading for a 2.3% rise at $15.73 per ounce.
 
Platinum edged above $800 per ounce for the 5th time over the last month, trading $10 higher from last week’s finish.
 
Facing calls to end the partial shutdown of US government agencies by putting his plans for a wall at the Mexican border on hold, “The Shutdown is only because of the 2020 Presidential Election,” President Trump also said on Twitter today.
 
“The Democrats know they can’t win based on all of the achievements of ‘Trump’.”
 
With the now Democrat-controlled House opening Thursday with what pundits widely call the “most diverse Congress ever” – including the first Native American women, the first Muslim women, the first openly bisexual senator, and the first Latina representatives from Texas – Trump tweeted a video entitled “Crisis on the border“, highlighting “Crime, drugs, lawlessness” and a need to “Build the wall”.

New Year 2019 Gold Price Surge 'Astonishing' as GLD Expands Fastest in 16 Months

January 3, 2019
Latest News
GOLD PRICES rose yet again in all major currencies bar the Japanese Yen on Thursday, extending New Year 2019’s gains to new all-time record highs against the Australian Dollar as Asian trading saw fresh turmoil in currency and equity markets.
 
The UK gold price in Pounds per ounce touched £1032 when Asian trade began, slipping back £10 in London hours, while gold priced in Euros touched €1033, some 12.0% higher from September’s 32-month low.
 
Gold priced in US Dollars meantime edged above $1290 for the first time since June as commodity prices hit new 18-month lows on Bloomberg’s index of natural resources.
 
Major government bond prices also jumped, pushing yields down once more to erase the last of 2018’s rise in longer-term interest rates for US, UK and Eurozone investors.
 
Termed a dash into “safe havens” by traders and analysts, the overnight turmoil in Asia also saw Yen gold prices spike down to 3-month lows as the Japanese currency leapt despite last month’s news that the world’s third largest economy shrank 2.5% annualized in the July to September period of 2018.
 
Chart of gold priced in Japanese Yen. Source: BullionVault
“Liquidity was non-existent on the move,” says a trading note from Swiss refining and finance group MKS Pamp, “with spreads [between buy and sell prices in Australian Dollars and Japanese Yen] blowing out to over a big figure for about 10 minutes.
 
“Given the rapid fall in the AUD…[gold in Aussie Dollars] opened an astonishing A$35 higher at $1875 and continued to push toward $1880.
 
“Australian [mining] producers were slow to realise,” MKS goes on, pointing to the world’s second-largest gold miner nation, “but have since been seen consistently on the offer, taking advantage of the very bullish move” to sell metal and lock in these record-high AUD gold prices.
 
Prices for producers in No.5 gold miner Canada also rose steeply, spiking to the highest since November 2017 at C$1760.
 
Chinese gold prices meantime hit their highest since April 2017 overnight Thursday, rising 10.0% in Yuan terms from last August’s multi-month lows and fixing in Shanghai at the equivalent of $1300 per ounce at today’s afternoon benchmarking auction.
 
Coming after new factory data said manufacturing activity in the world’s 2nd largest economy shrank for the first time in 19 months in December on falling export and domestic orders, that put Shanghai gold prices more than $11 per ounce above London quotes.
 
That extended the last week’s run of seasonally strong incentives for new gold imports to the metal’s No.1 consumer nation ahead of the Chinese New Year, starting the Year of the Pig on 5 February.
 
Chart of Shanghai gold price in Yuan per gram. Source: SGE
 
“My feeling is that the market is virtually positioned for a mild recession, but I just don’t think that it’s going to happen,” said Wharton professor Jeremy Siegel to MarketWatch of the US equity slump on Wednesday.
 
“If we avoid a recession, we’re going to have a really good market…I think we swung too positive last summer and now I think we’ve swung too negative.”
 
Wednesday saw the giant SPDR Gold Trust (NYSEArca: GLD) expand by 1.0% as investor demand outpaced selling of the world’s largest gold-backed ETF trust fund.
 
Growing to need 795 tonnes of bullion backing, the size of the GLD now shows a 4-week correlation with the Dollar gold price of +0.92, the most positive reading in 5 months.
 
That figure would read +1.0 if gold and the GLD’s size moved perfectly together.
 
Since Christmas Day the GLD has now grown by 21.2 tonnes, the heaviest 5-session inflow since September 2017.
 
Platinum again held little changed Thursday, trading below $800 per ounce, but silver tracked gold prices higher, touching 6-month highs at $15.62 per ounce.
 
Priced in US Dollars, silver moved in the same direction as gold prices for the 9th time in the last 10 years in 2018.
 
But while gold slipped 1.1% across last year to finish at $1281 in London’s wholesale bullion market, silver prices fell 8.3% to finish at $15.46 per ounce.

Gold Holds $1260, Hits 18-Month High in Yuan as 2019 China GDP Cut, Stimulus Promised

December 22, 2018
Latest News
GOLD PRICES held near this week’s new multi-month highs on Friday in London as equities fell yet again amid fresh political turmoil in the Trump White House and new fears over GDP growth in China, the world’s second largest economy.
 
With global stock markets falling for the 9th time in 15 sessions this month, gold priced in Dollars traded $20 higher for the week and $40 per ounce higher for December so far, holding at $1260 after new US data said the No.1 economy expanded by 3.4% annually between July and September.
 
Among major share indexes only Hong Kong’s Hang Seng avoided a loss, with mainland China’s CSI 300 extending its 2018 drop to more than 25% despite promises of “much larger scale” fiscal and monetary stimulus from this week’s annual Central Economic Working Conference in Beijing.
 
“Significant” tax cuts will in 2019 follow cuts already made this year, while “prudent” monetary policy will follow the People’s Bank’s new low-rate “targeted” loans to small businesses plus 2018’s four cuts to commercial lenders’ reserve requirement ratio.
 
With the Beijing regime targeting 6.5% annual GDP growth, the World Bank today cut its 2019 forecast for China to 6.2%.
 
For the world’s No.1 gold mining, importing and consumer nation, that would be the slowest rate of economic expansion since the global recession of 1990.
 
Chart of China's annual GDP growth. Source: World Bank
 
With China and the US set to impose harsh trade tariffs on each other exports if no deal is reached by the end of the current 90-day suspension, “The world is facing a major change,” says Beijing’s state-run news agency Xinhua “the likes of which has not been seen in a century, and which includes both risks and opportunities.”
 
Marking 40 years of “opening up” since Deng Xiaoping began China’s economic reforms at 1978’s Third Plenum of the 11th Central Committee, a 90-minute speech from current president Xi Jinping “mentioned the word ‘party’ 128 times,” notes the South China Morning Post, “compared with just 87 times for ‘reform’ and 67 for ‘opening up’.
 
“We will resolutely reform what should and can be reformed, and make no change where there should not and can not be any reform,” he said, reiterating the policy of “socialism with Chinese characteristics”.
 
“It is clear that China and Russia…want to shape a world consistent with their authoritarian model,” says US Secretary of Defense James Mattis in a letter of resignation to President Trump, accusing the White House of failng to treat US allies with respect while turning a blind eye to “malign actors and strategic competitors“.
 
China’s government was today blamed by the US, UK, Australia and other governments of a cyber attack, apparently aimed at stealing commercial secrets, for which two Chinese nationals were indicted yesterday.
 
Former Nato Supreme Allied Commander, Mattis resigned overnight after Trump signalled that – on the 30th anniversary of the Lockerbie bombing, when terrorists killed 259 mostly US airline passengers and 11 residents of the small Scottish town – he would announce pulling US troops out of Afghanistan.
 
Heading into London’s Friday afternoon benchmarking auction, gold bullion was on track for its highest weekly close since mid-June in both Dollar and Euro terms, and since September 2017 in British Pounds and Chinese Yuan.

Gold Prices 'Healthy' After Fed's Final 2018 'Mistake' on US Debt Burden

December 21, 2018
Latest News
GOLD PRICES rallied from an overnight drop against all major currencies on Thursday in London, challenging new 5-month highs in Dollar terms after the US Federal Reserve yesterday raised its key interest rate as expected but also downgraded its outlook for 2019.
 
Silver and platinum prices also rose back towards this week’s highs as Asian and then European stock markets extended Wall Street’s overnight slump, taking 2018’s slide in Germany’s Dax index to more than 18%.
 
Despite the Fed’s hike to short-term US rates, 10-year US bond yields today held around 2.77%, the lowest level since April.
 
Raising the overnight cost of Dollars to 2.50%, senior members of the Fed trimmed their forecast ranges for US economic growth across each of the next 3 years, and edged their end-2019 interest-rate forecast down from 3.1% to 2.9%.
 
Betting that the Fed will end 2019 with rates where they now stand today has leapt according to data from the CME derivatives exchange, more than doubling the market’s view of that likelihood over the last month.
 
The chances of 2 or more Fed hikes in 2019 have sunk, the same data say, from one-in-three at this point in November to barely 1-in-10 this morning.
 
Chart of current speculative betting on end-2019 US Fed rates. Source: CME
 
“Political considerations play no role whatsoever in our discussions or decisions about monetary policy,” said Fed chair Jerome Powell in Wednesday’s post-decision press conference, responding to questions about President Donald Trump’s repeated warnings to avoid “yet another mistake” by raising the cost of borrowing.
 
Looking at the interest-cost burden on US finances, “The dynamics of the US economy, budget and debt are all going to come very much more into focus in 2019,” says bullion bank ICBC Standard’s Tom Kendall in a new video.
 
“When you get institutional money coming back into gold, because they feel gold is needed as a diversifier against inflation and uncertainty about what’s happening with US rates, that should start to create a more positive story.”
 
Early Thursday’s drop in gold prices meant “the market looks to have over analysed the potential for a shock December decision [to hold rather than raise rates] and was caught overly long,” said a gold note from Swiss refiners and finance group MKS Pamp as London trading opened.
 
“[That] move lower could be viewed as a healthy retracement, with price action…notably supported by a halt in the Greenback’s recent strength and softer global equity markets.”
 
Gold priced in Sterling meantime edged back above £990 per ounce as Parliament broke up for Christmas with no progress on avoiding a “hard Brexit” in 99 days’ time, the Bank of England held UK interest rates unchanged, and London’s No.2 airport Gatwick was shut by unmanned drones flying across its runways in what police called a “deliberate act” of disruption.
 
The drones appear “industrial size…[not] one you can buy from the shops,” the BBC quotes one expert.
 
“A police helicopter was dispatched to track down the vehicle and its operator, so far without success,” says Russia Today’s English-language website, RT.com.
 
RT broke UK impartiality rules in its coverage of this spring’s poison attack on ex-spy Sergei Skripal and his daughter Yulia, media regulator Ofcom said today.
 
“We are minded to consider imposing a statutory sanction,” Ofcom says.
 
Euro gold prices meantime held a €1 per ounce gain for the week so far at €1096, capped by the single currency rising to 6-week highs against the Dollar on the FX market.

'Why Wait to Buy Gold?' as T-Bonds Erase All the Fed's 2018 Rate Hikes

December 20, 2018
Latest News
BUY GOLD prices edged back from a 1.0% rise for the week so far on Wednesday in London, taking Dollar prices down $3 from a new 5-month peak of $1251 as traders awaited the US Federal Reserve’s final policy statement of 2018, widely expected to bring the fourth hike of the year to short-term interest rates.
 
Major government bond prices rose, edging long-term interest rates down, as Western stock markets shrugged off another drop in Asian equities to add around 1% for the day, trimming 2018’s loss to date beneath 15%.
 
Japan’s Topix index has also now lost over 14% since last New Year, and China’s CSI 300 index has lost 23%.
 
“If like me, you believe the post-2009 bull market in equities has hit a wall, then why wait to buy gold?” asks newsletter writer, crypto-currency analyst and ex-HSBC fund manager Charlie Morris, turning bullish on the gold market for the first time since 2012.
 
“For gold to beat equities has become an undemanding task…Gold’s job is to be a reliable store of value, and sometimes, zero is the best deal in town.”
 
With only 3 hours until the Fed’s key December decision and 2019 forecasts on Wednesday, the yield offered by 10-year US Treasury bonds slipped to 2.82%, down dramatically from November’s new 7-year high of 3.24% and back to a level first seen in February.
 
That was before any of the Fed’s three hikes to short-term rates so far in 2018.
 
Chart of 10-year US Treasury yields vs. the effective Fed Funds rate. Source: St.Louis Fed
 
“The [gold] market has priced in the fourth hike but what remains important is the foreguidance for 2019,” reckons commodities analyst Benjamin Lu at Phillip Futures in Singapore.
 
“Volatility seen in equity makes could be a reason why investors are considering allocation to gold,” reckons Chirag Mehta, a manager at the Quantum Mutual Fund in India.
 
The giant SPDR Gold Trust (NYSEArca:GLD) yesterday expanded by 1.1% as investor demand created new shares in the world’s largest gold-backed ETF.
 
That needed an additional 8 tonnes of gold, taking the GLD’s total backing to the largest since August at 772 tonnes with the 4th heaviest 1-day inflow of 2018 so far.
 
Producer price data for both the UK and Germany on Wednesday meantime defied analyst forecasts of a steep slowdown – foreseen on last month’s falling oil price – with British factories suffering 5.6% annual input-cost inflation ahead of next March’s exit from the European Union.
 
With the UK Government now readying £2 billion of emergency spending plus armed-forces support for essential supplies and services, Brussels today said it is also starting to implement plans for a “no deal” Brexit.
 
The British Parliament meantime – set to shut for Christmas tomorrow until Monday 7 January, leaving just 59 working days before Brexit – today moved to hold a debate on whether, under his breath, opposition Labour Party leader Jeremy Corbyn called Prime Minister Theresa May a “stupid woman” as suggested by BBC political editor Laura Kuenssberg on Twitter, a phrase for which the Speaker of the House John Bercow was not investigated earlier this year.
 
UK gold priced in Pounds per ounce today spiked back to £990, near the highest since June.
 
Euro gold retreated to €1095, also back in line with where the bullion market began last New Year.
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