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Gold Sets 13-Week Closing Low, Bitcoin +993% in 2017 as US Jobless Hits 'Tech Bubble' Low

November 4, 2017
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GOLD PRICES gave back a $5 pop on new US jobs data Friday to near the weekend at $1269 per ounce – a 13-week closing low – as world stock markets slipped from new all-time highs.
 
Crude oil rose but base metals eased back further from their 25% gains of the last 6 months.
 
Major government bond prices ticked higher, pushing yields down, while crypto-currency Bitcoin set another fresh all-time record at $7454 – up 993% from this day 12 months ago.
 
October 2017 showed weaker than expected US jobs growth, Friday’s official first-estimate said, but the civilian unemployment rate fell to 4.1% of the working age population, the lowest in almost 17 years.
 
The Dollar rose on the currency market, helping the gold price in Euro terms hold just 0.3% lower for the week at €1093 per ounce.
 
“Madrid’s decisive approach to shutting down Catalonia’s bid for independence has won the approval of bond market investors,” says Reuters, noting that “investors have piled into Italian, Spanish, Portuguese and even Greek debt over the past month.”
 
That has driven the spread of Spanish 10-year yields over German Bunds back down below 1.2%.
 
Shares in China’s e-commerce giant Alibaba (NYSE:BABA) have meantime “crushed the FANGs” of US tech stocks Facebook, Apple, Netflix and Google, says Bloomberg, gaining 110% so far this year to the 31% rise in Western internet search-leader Alphabet (NASDAQ: GOOGL).
 
Just missing a new all-time closing high on Thursday, US equity index the Nasdaq has now risen 33% above its March 2000 peak marked the top of the Tech Stock Bubble.
 
US unemployment last month recorded its lowest level since December 2000.
 
Chart of US jobless rate vs. Nasdaq Composite index. Source: St.Louis Fed
 
The gold price “is testing [a] downward channel limit” says the technical analysis led by Stephanie Aymes at French investment bank Societe Generale today, pointing to a downtrend joining September’s 12-month high at $1356 with October’s lower peak of $1306 and now coming in at $1276.
 
“Next support is located at recent lows of $1263…also the 200 day moving average,” says SocGen.
 
“I know that once upon a time, a coin was worth $5 if it had $5 worth of gold in it,” said US investment bank Goldman Sachs’ CEO Lloyd Blankfein in an interview this week, saying he doesn’t discount Bitcoin’s potential as a genuine currency.
 
“Now we have paper that is just backed by fiat…Maybe in the new world, something gets backed by consensus.”
 
Meantime in Venezuela, and having failed to pay back cash last month in a gold-swap deal with Deutsche Bank – and so losing some 43 tonnes of bullion reserves – the Socialist government of Nicolás Maduro said overnight it wants a “restructuring” deal on its debt, effectively threatening an outright default according to one analyst quoted by Reuters. 
 
Venezuela’s 10-year bond prices fell by 30% following the news overnight.
 
Spain’s courts were today expected to issue a European arrest warrant for rebellion and sedition against Catalonia’s ex-governor Carles Puigdemont, now in Brussels.
 
Belgium’s prime minister Charles Michel has asked ministers in his fragile 4-party coalition not to comment on the situation for fear of enflaming separatism in his own country’s Flemish region, according to newspaper Le Soir.

Interest Rate Expectations 'Driving Gold Prices' as Fed Holds, BoE Hikes Yet Pound Sinks

November 3, 2017
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GOLD PRICES held or rose near multi-week highs for most investors outside the US Dollar and Euro on Thursday, as the Bank of England followed the Federal Reserve’s widely expected “no change” decision by raising UK rates off an all-time record low as analysts and traders had forecast.
 
The Pound fell hard on the UK news, erasing all of this week’s prior 2 cent gain to trade back at $1.3050 on what pundits called profit-taking.
 
That pushed the UK gold price in Pounds per ounce up towards 2-week highs above £974.
 
Dollar gold prices held little changed at $1277, slightly higher for the week so far, while Euro priced gold held at €1096.
 
European stock markets slipped and London’s FTSE100 gave back all of a sharp jump made as the Pound fell on the Bank of England’s 12 noon decision.
 
“Today’s decision is straightforward,” said BoE governor Mark Carney, presenting today’s decision alongside the Bank’s latest quarterly Inflation Report.
 
“With unemployment at a 42-year low, inflation above target and [GDP] growth just above its new, lower speed limit, the time has come to ease our foot off the accelerator.”
 
“A rules-based approach” on the so-called non-accelerating inflation rate of unemployment (Nairu) “would deliver higher rates faster” wrote French investment bank analyst Kit Juckes last month of potential US Federal Reserve chair John Taylor’s academic analysis.
 
“These aren’t normal times,” said Carney at the Bank of England on Thursday, pointing to the UK’s Brexit vote to leave the European Union as a cause of “uncertainties [now] weighing on domestic activity, which has slowed even as global growth has risen significantly.”
 
“Inflation is above our 2% target because of the sharp fall in the Pound triggered by the EU referendum,” says the Bank’s Inflation Report.
 
But even after today’s rate rise, “Debt servicing costs remain historically very low,” say the minutes from the Monetary Policy Committee’s meeting.
 
Two members dissented, preferring to hold rates at 0.25% and mirroring the previous run of 7-2 decisions against raising rates. 
 
When Bank Rate last stood at 0.5%, back in July 2016, inflation in the official UK consumer-price index was running at 0.6% per year. It came in at a 5-year record of 3.0% for September this year.
 
So far in 2017 gold priced in Sterling has averaged its highest-ever January-to-October level outside of 2012 at £980 per ounce.
Chart of UK real interest rate vs. gold price in Sterling. Source: BullionVault
 
“US interest rates and their expectations have for some time been the single most important driver of gold price fluctuations,” says the new Precious Metals Brief from institutional news-source PAM Insight and specialist analysts Metals Focus.
 
With Donald Trump expected to name current Fed governor Jerome Powell as his pick for the central bank’s role of chair later today, Wednesday’s “no change” statement from the US central bank was seen “reaffirming the view that a December hike is in their baseline, and it’s in ours as well,” says UK bank Barclay’s chief US economist Michael Gapen, speaking to Bloomberg in New York.
 
However, the odds of no change or just 1 more rise before October 2018 rose after Wednesday’s Fed decision, reaching 65.4% from 62.0% this time last week according to betting on interest-rate futures.
 
Today’s UK economic forecasts from the Bank of England project two more interest rate hikes over the next 3 years, taking the cost of short-term borrowing up to 1.0% by late-2020 – some 18 months after the UK is scheduled to leave the EU.

Gold Price 'Unmoved' by Catalonia, Down 7 Months in 12 as US Stocks Up in 11 Ahead of the Fed

November 2, 2017
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GOLD PRICE gains of 0.9% overnight evaporated against a rising US Dollar in London on Wednesday ahead of the Federal Reserve’s latest policy decision, widely-expected to leave interest rates and QE unchanged.
 
Gold popped to 1-week highs at $1280 per ounce in Asian trade overnight as the Caixin PMI survey said Chinese manufacturing activity held near stall-speed in October.
 
Bullion prices then retreated to stand unchanged for the week so far at $1273 as European stock markets followed Wall Street higher towards fresh all-time records, and private-sector US data put October’s jobs growth well ahead of analyst forecasts.
 
Ex-Catalan governor Carles Puigdemont refuses to attend tomorrow’s court hearing in Spain over charges of rebellion, his lawyer said Wednesday, but will answer questions instead from Belgium where he has fled.
 
Colleagues of Puigdemont today returned from Belgium to boos and shouts of “Prison!” from a small group of pro-Spanish protesters at Barcelona’s El Prat airport.
 
“Tensions in Catalonia have not attracted safe haven flows to gold,” says a note from Swiss bank and London bullion market-maker UBS, “which is in line with the limited impact on other markets as well.”
 
“Gold [also] seems to be seeing little benefit from safety flows on the back of Special Counsel Robert Mueller’s investigation,” says refining and finance group MKS Pamp of alleged Russian government links to Donald Trump’s 2016 election campaign.
 
Despite last month’s unofficial Catalan referendum and declaration of independence, the gold price in Euros added only 0.4% in October, edging 5 Euros higher per ounce today to EUR1096 per ounce.
 
Gold priced in Dollars fell 1.3% in October, its 7th monthly drop of the last year.
 
New York’s S&P500 index of stocks in contrast rose 2.2%, its 11th monthly gain of the last year and its 7th new all-time record monthly closing high in succession.
 
Chart of gold priced in Dollars vs. S&P500 index, monthly finish. Source: St.Louis Fed
 
“Asian interest today was again rather muted [but] Shanghai saw a heightened premium [to global quotes for London settlement] around $9 per ounce” – back in line with the historical average.
 
With only 1.5% of bets on US interest-rate futures now expecting any change at Wednesday’s US Federal Reserve decision, “All eyes will be on President Trump’s nomination for the Federal Reserve Chair,” MKS goes on.
 
“Should [existing Board member] Jerome Powell get the nod, we are likely to see near-term Dollar weakness that should underpin a move higher for bullion.”
 
Chooing Powell “could lead to some consolidation in the Dollar [and] offer some relief to gold,” agrees UBS.
 
“However, headwinds linger for now,” it adds, pointing to this week’s debate in Congress on Trump’s US tax reforms plus the December Fed meeting on interest rates, now 96.7% certain to see a hike to a ceiling of 1.50% according to data from derivatives exchange the CME.

Gold Price Slips as Catalan Crisis 'Goes International' in Belgium, Japan Cuts Inflation Forecast

October 31, 2017
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GOLD PRICE gains of 0.5% evaporated in Dollar terms in London trade Tuesday as European stock markets rose with government bond prices despite the “internationalization” to Belgium of Catalonia’s separatist push against Spain.
 
With Dollar-gold trading down to last week’s finish at $1272 per ounce – the lowest Friday close since early August – the gold price in Pounds per ounce flirted with 1-month lows for UK investors at £960, and also fell against most other major currencies.
 
Ahead of Wednesday’s US Fed decision on Dollar interest rates, the Bank of Japan today held its negative rate and unlimited QE asset purchase programs unchanged yet again.
 
But the Tokyo central bank trimmed its forecast for consumer-price inflation in the world’s third largest single economy back below 1.0% per year in 2018, meaning it “will be in no position to tighten policy anytime soon,” says consultancy Capital Economics’ Marcel Thieliant.
 
The Yen fell Tuesday morning to ¥113 per Dollar, while the Nikkei stock index held flat and 10-year bond yields – now targeted at zero by the Bank of Japan’s QE policy – edged higher towards 0.07%.
 
On a 3-monthly basis, Dollar-priced gold showed a near-record strong correlation against the Dollar’s Yen exchange rate earlier this year, with the two moving almost in lock-step.
 
That strongly negative correlation has since eased off, moving from August’s reading of -0.97 back towards the relationship’s 10-year average of -0.50 in October.
 
Chart of gold in Dollars vs. the Dollar's Yen exchange rate. Source: St.Louis Fed
 
Meantime in Spain, the national government’s Civil Guard today visited offices of the Mossos d’Esquadra to question Catalonia’s police force over its involvement in the illegal referendum on independence held by Barcelona on 1st October and now known as 1-O.
 
Madrid this weekend anulled the regional parliament and called fresh elections for Catalonia on 21 December, already nicknamed 21D.
 
Now fled to Belgium at the invitation of the Flemish minister for asylum and migration – an invitaton since denied as party policy by a spokesman for the N-VA, one of 4 parties in Belgium’s fragile ruling coalition – ex-Catalan governor Carles Puigdemont said at a chaotic press conference that he and 5 former colleagues weren’t seeking asylum but wanted to “internationalize” the dispute and “make clear that there is a problem with Catalonia.”
 
Vowing to stand for and then “respect” the electorate’s decision on 21D, Puigdemont has appointed as legal counsel the Belgian lawyer Paul Bekaert, a self-declared specialist in European arrest warrants, extraditions and political asylum who over the last 30 years has advised Northern Ireland’s IRA, Kurdish separatists, Turkey’s Marxist DHKP and radical Basque separatists ETA.
 
Belgium’s 10-year bond yields edged higher on Tuesday but held near the low-end of 2017’s range at 0.62%.
 
Spanish 10-year yields meantime retreated to the lowest in almost 2 months, falling to 1.48% as the Ibex 35 index of major shares rose to its highest since mid-August, gaining over 6% from early October’s 7-month low.
 
The Euro slipped back below $1.1650, barely 1 cent above Friday’s 3-month lows to the Dollar.
 
That helped the gold price in Euro terms rise within 0.2% of €1100 per ounce for the fourth time in 3 days before it fell back to €1093.

Gold Prices Slip in Big Week for Central-Bank Policy, Trump Campaign Managers Arrested

October 31, 2017
Latest News
GOLD PRICES inched lower on Monday morning in London ahead of a busy week for central bank policy meetings, plus Donald Trump’s pick for the next head of the US Federal Reserve, writes Steffen Grosshauser at BullionVault.
 
After the European Central Bank slowed its QE stimulus growth last week, the Bank of Japan will announce its latest policy on Tuesday, followed by the Fed on Wednesday and the Bank of England on Thursday.
 
No change to the US and Japanese benchmark rates is expected, but the UK is set to raise rates from the current all-time low of 0.25% according to consensus forecasts.
 
“Gold continues to face strong headwinds from US economic growth, an equity rally boosted by tax reform and a potentially more hawkish Fed,” says the latest weekly note from Japanese conglomerate Mitsubishi’s Jonathan Butler.
 
“President Trump is said to favour existing governor Jerome Powell, widely seen as a relatively dovish continuity candidate. [But] the surprise outcome would be the announcement of Prof. John Taylor…[and] likely see a rally in Treasury yields and the Dollar, and damage gold.”
 
The largest gold-backed ETF trust fund vehicle, the SPDR Gold Trust (NYSEArca:GLD), saw outflows of 2.4-tonnes last Friday after being unchanged at 853.1 tonnes for eight days.
 
Hedge funds and other large speculators cut both their bullish and bearish betting on Comex gold futures and options last week, according to the latest US Commodity Futures Trading Commission data. 
 
Altogether, the CFTC data show ‘Managed Money’ cutting its net long position to the lowest level since July, down for the 6th week straight.
Chart of Managed Money's net long position in Comex futures and options. Source: BullionVault via CFTC
 
Gold prices fell slightly on Monday from last week’s close at $1273 per ounce to $1271, managing to stay above the 3-week low at $1264 hit earlier on Friday. 
 
Gold measured in Euros slipped further, down from €1096 to €1092 per ounce after hundreds of thousands of supporters of a unified Spain took to the streets of Barcelona on Sunday, protesting against the Catalan parliament’s declaration of independence.
 
Spain’s Ibex 35 index rose 2%, recovering most of the spike it lost on Friday‘s news from Barcelona, while European stock markets traded sideways overall.
 
“Powell certainly could cool the rate and Dollar rally heading into November,” says brokerage INTL FCStone’s analyst Edward Meir. 
 
“A dovish appointment [Janet Yellen or Jerome Powell] would be more bullish for gold, while a hawkish pick [Kevin Warsh or John Taylor] would be bearish.”
 
The US Dollar today softened against its major counterparts, but still hovered near 3-months highs as news broke that Donald Trump’s election campaign managers from 2016 have handed themselves in to police and been arrested on as-yet unknown charges regarding Russian interference in his victory as president.
 
Trump’s decision on his pick for Fed chair is expected before he leaves for an 11-day tour of Asia on Friday, which will also bring key monthly US jobs data.

Gold Bullion Near Lowest Friday Finish Since August as Dollar Gains Before US GDP Data

October 27, 2017
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GOLD BULLION headed for its lowest weekly close since the start of August today, losing over 1% against the rising Dollar from last Friday’s finish as world stock markets rose yet again.
 
After Thursday’s latest data showed the US trade deficit, jobless benefit claims and pending home-sales all worsening, economists on average forecast a slowdown to 2.5% annualized growth in the Q3 GDP figures due out today.
 
The PCE measure of inflation was expected to show a sharp jump.
 
Large gold bullion bars traded in London’s wholesale market fell to $1266 per ounce ahead of those US numbers, but added 0.5% for the week to €1091 in Euro terms after the European Central Bank on Thursday unveiled its “dovish tightening” plan for Eurozone QE bond purchases.
 
Yesterday morning’s Shanghai gold premium of just $6 over London quotes improved Friday towards the usual incentive of $8-9 per ounce, says a note from the Asian trading desk of Swiss refiners MKS Pamp.
 
But that “prompted little demand out of China,” where gold imports from Hong Kong – formerly the only route for bullion into the mainland – fell last month to the lowest net total since January 2016 according to new data today.
 
Global physical gold demand rose 7% year-on-year between July and September, says the new Q3 2017 gold update from specialist analysts Thomson Reuters GFMS, “[but] this is effectively damning with faint praise.
 
“Physical demand was at its lowest level for a year [and] if we strip out the exceptional situation in 2016 it marked the lowest quarterly total since [the global economic recession of] Q4 2009.
 
“Coupled with only modest [gold-backed trust fund] ETF purchases,” GFMS goes on, “this led to the largest surplus at the net balance level since Q4 2005…when prices averaged just $483.”
 
Chart of Q3 2017 global gold market balance from Thomson Reuters GFMS
 
After the ECB’s announcement drove the Dollar higher on Thursday, “Gold closed below the 100-day moving average,” says the latest technical commentary from Russell Browne at bullion bank Scotia Mocatta’s New York office.
 
“New support comes in at $1260.50, this month’s low…I am now bearish gold, targeting the $1250 level.”
 
“If buoyancy in the greenback and equities continues,” agrees MKS Pamp’s trading team, “we could see gold testing the support at the October lows around $1260, with next key level at $1250.
 
“On the upside first resistance [sits] at $1280 followed by the all-important $1300 psychological level.”
 
Gold prices in No.2 consumer nation India meantime rose this week to a $3 premium over global quotes, Reuters says, but “after Diwali, demand falters every year,” it quotes wholesaler Daman Prakash Rathod at MNC Bullion in Chennai.
 
“This year, even during Diwali demand was lower than usual,” he adds, with other reports citing a 30% drop from last year’s key festive season, creating large stockpiles for traders who drove India’s imports higher by one-third last month from September 2016 in anticipation of stronger consumer interest.
 
Gold bullion imports to world No.5 consumer nation Turkey are meantime “expected to post a new record this year,” says GFMS new Q3 gold report, “driven by stimulus from the central bank and strong jewelry and coin demand.”

Gold Prices +9% in 2018 Says GFMS as ECB's QE 'Taper' Dents Euro

October 26, 2017
Latest News
GOLD PRICES fell against a rising US Dollar on Thursday but erased this week’s earlier 0.7% loss versus the Euro currency as the European Central Bank unveiled a smaller than expected “taper” of its quantitative easing program.
 
Vowing to keep its zero and negative interest-rate policy unchanged “for an extended period [and] well past the horizon” of QE asset purchases, the ECB said it will halve the monthly volume of bond buying to €30 billion from January.
 
Continuing to buy until at least September 2018, the Eurozone’s chief central bank will then maintain its holdings of government and other debt by “reinvest[ing] the principal payments from maturing securities…for an extended period of time after the end of its net asset purchases.”
 
The Euro lost almost 1 cent versus the Dollar on the FX market, buoying the gold price for German, French and Italian investors back above €1085 per ounce.
 
Gold prices for US investors fell 0.5% for the week so far in contrast, trading back down to $1275.
 
Major government bond yields retreated across the board from this week’s multi-month highs, with German 10-year Bunds now offering 0.45% and benchmark US T-bonds offering 2.42% per annum – unchanged from the start of 2017 but now just ahead of US inflation on a slowdown in the cost of living.
 
UK Gilt yields also fell after new private-sector data showed the hardest drop in retail sales since the depths of the global financial crisis in March 2009 after official inflation rates showed a 5-year high.
 
Spain’s main share index meantime jumped 2.0% while broader Eurozone equities gained 0.5% after news broke that Catalan leader Carles Puigdemont will call local elections – apparently set for 20 December – to meet the national government’s demands for not imposing direct rule following this month’s unofficial referendum on independence.
 
“155 silver coins,” tweeted one pro-independence Catalan politician, referring to the Article 155 rule enabling Madrid to quash regional autonomy and to the 30 silver coins paid to Judas Iscariot for betraying Jesus of Nazareth.
 
Chart of Eurozone annual growth rate in lending to the private sector, September 2017. Source: ECB
 
“Many major Western central banks are now looking to tighten policy in the coming months,” said Ross Strachan, manager of Metals Demand Europe for specialist analysts Thomson Reuters GFMS, launching the consultancy’s Q3 gold update this morning.
 
“Because the consensus on this is so widespread however, I’d strike a note of caution on how this will affect gold prices. The US Fed’s December rate rise for example is, I’d suggest, already factored into the market. Central banks stand a strong chance of surprising the market if [next year’s] tightening isn’t as swift as expected.”
 
Other risks exist to GFMS’ outlook for 2018, Strachan went on, pointing to the possibility for further record highs in world stock markets and what looks to be “a synchronized global economic upturn”.
 
But with investors increasingly anxious about a sharp correction or crash in global equities, next year will see an average gold price of $1360 per ounce – almost 9% ahead of 2017 to date – with a peak above $1400 on GFMS’ new analysis.

Gold Prices Hit 3-Week Low as UK GDP Makes Rate Rise a 'Done Deal', GOP Back Taylor Rule at US Fed

October 25, 2017
Latest News
GOLD PRICES fell to the lowest in 3 weeks against all major currencies in London on Wednesday, falling as world stock markets rose after Wall Street set fresh all-time highs despite growing expectations of tighter central-bank policy in the US, UK and Eurozone.
 
UK government Gilt yields jumped to their highest since February followed stronger-than-expected GDP growth for Q3, while US 10-year Treasury yields rose to fresh 7-month highs of 2.45% after news reports said Republican lawmakers advised President Trump to pick “hawkish” economist John Taylor as the next chair of the Federal Reserve.
 
“Nothing less than the big ‘taper’ plan for next year is expected from Mario Draghi” at tomorrow’s European Central Bank press conference, says CNBC.
 
Eurozone stock markets edged higher on Wednesday but London’s FTSE100 slipped and the UK-focused FTSE250 held flat after new GDP figures said economic growth held at 1.5% per year in the third quarter of 2017.
 
The last major data release before next week’s Bank of England interest-rate decision, that just beat analyst forecasts but still put GDP growth at the slowest in almost 5 years, with the construction sector technically in “recession” by shrinking for the second quarter in a row.
 
Sterling jumped almost 1.5 cents against the Dollar to a 1-week high above $1.32.
 
That sank the UK gold price in Pounds per ounce by £10 to £960, the lowest level since early October.
 
Chart of the wholesale gold bullion 'spot' price in British Pounds. Source: BullionVault
Despite fears of an underlying slowdown as Brexit talks wear on, “The GDP data suggest the UK could stomach a rate rise,” says one London fund manager.
 
With UK inflation already at 5-year highs, today’s data “probably sealed the deal” on a rate rise next month from the current record-low 0.25% adds an economist.
 
Reporting Tuesday’s GOP “vote” on the next Fed chair meantime, “Trump only asked about [current Fed governor Jerome] Powell and Taylor,” says one report, “and most senators simply smiled instead of raise a hand for either candidate.”
 
Prior to current chair Janet Yellen’s term ending in February, December’s US rate rise to a ceiling of 1.50% is now virtually certain according to betting on CME futures contracts.
 
From there to September 2018, the odds of “no change” have fallen over the last month from stronger than 1-in-3 towards just 1-in-5.
 
“Speculation about higher interest rates in the US is weighing on the gold price,” says the latest Commodities Daily from German financial services group Commerzbank.
 
“If [Trump] does indeed choose Taylor, gold is likely to fall sharply.”
 
First proposed in a 1993 paper, the Stanford academic’s so-called Taylor Rule “calls for interest rates significantly higher than they are now,” says a story on Bloomberg.
 
“But [Taylor’s] support of tax cuts [by the Trump admininstration] may make him reluctant to hike rates.”

Gold Price Slips as Bond Yields Rise But UK Rate Hike 'Not Certain' Despite 5-Yr Inflation High

October 24, 2017
Latest News
GOLD PRICES gave back yesterday’s bounce against a rising Dollar in London on Tuesday as world stock markets ignored Wall Street’s drop, bond yields rose, and a UK policy-maker tried to cool expectations for a hike in Pound Sterling interest rates.
 
America’s S&P500 index last night capped a 5-day streak of new all-time record highs by falling 0.4%, led lower by the worst day for multinational General Electric (NYSE:GE) since August 2011 on a string of analyst downgrades.
 
Major government bond prices fell as Asian and European equities rose this morning, pushing 10-year US Treasury rates up to their highest since May at 2.41% after President Trump said he’s “very, very close” to announcing his pick for the Federal Reserve chief when Janet ‘low rate’ Yellen‘s current term ends next February.
 
Gold prices traded 0.3% lower versus the Dollar for the week so far, slipping back to $1277 per ounce as the US currency edged higher on the FX market.
 
Gold priced in Sterling also slipped even as the Pound fell after senior Bank of England official Sir Jon Cunliffe said a November rate-hike remains “an open question”.
 
Interest-rate traders “are still pricing in an 82.4% probability of a rate hike next week,” says The Telegraph, and “over the [Bank’s] forecast period of three years rates will need to rise,” agreed Cunliffe, deputy governor for financial stability, speaking to Wales Online.
 
“[But rates] will not need to go up as far and as fast as they did before the crisis [and] the exact timing…is a more open question.
 
“For me the economy has clearly slowed this year [and] that is going to put some domestic pressure on inflation.”
 
UK inflation last month hit 3.0% per year on official data, the fastest rise in the cost of living since April 2012.
 
Bank of England interest rates currently stand at a record low of 0.25%, cut after 7.5 years at a then-record of 0.50% following mid-2016’s Brexit referendum shock.
 
Over the last 4 decades the UK gold price in Pounds per ounce has become increasingly linked to movements in real UK interest rates, after accounting for inflation.
 
Moving in an opposite direction to real rates 51% of the time between 1977 and 2007, gold moved opposite to the direction of real UK interest rates in 65% of all months over the last decade, rising to 73% since 2012.
 
Chart of UK gold prices vs. real UK base interest rates. Source: BullionVault
 
Sterling gold prices retreated below £970 per ounce on Tuesday, while London’s FTSE100 share index today held flat to trade within 0.4% of mid-October’s all-time high.
 
German chancellor Angela Merkel is “furious”, says The Times, over a weekend report that UK prime minister Theresa May “begged for help” from EU leaders over Brexit, acting “anxious, despondent and discouraged” according to what German newspaper FAZ called EC president Jean-Claude Juncker’s description “to his colleagues”.
 
While “frustrated” by the UK leadership’s negotiations, Merkel “is [apparently] concerned above all that talks will collapse”, risking May’s replacement by a more anti-EU figure such as current foreign secretary Boris Johnson.
 
“This could hurt European economies.”
 
“It is in fact up to London how this will end,” said EU president Donald Tusk in Brussels today. “But [whether] a good deal, no deal or no Brexit, we will protect our common interest only by being together.
 
“If we fail…then the negotiations will end in our defeat,” Tusk told European lawmakers in parliament. 
 
Spain’s Ibex index meantime ticked higher but held over 8% below May’s 2-year peak after CaixaBank reported a record 9-month profit of €1.5bn but said its move out of the breakaway region of Catalonia to neighboring Valencia “is not temporary”.
 
Spain’s national economic health is already suffering from the unofficial Catalan referendum and resulting uncertainty, the Madrid government said Tuesday.
 
Rome is ready to negotiate more fiscal control for Lombardy and the Veneto, local press report, after 90% of voters in the two wealthy Italian regions backed a call for greater autonomy.
 
Gold priced in the single Euro currency today erased Monday’s 0.5% gain, trading back at €1086 per ounce as the EuroStoxx 50 index of the largest single-market corporations ticked 0.3% higher.

Abenomics' Landslide Win Dents Japanese Yen, Gold Prices Drop to $1275 'Support'

October 23, 2017
Latest News
GOLD PRICES fell to 2-week lows against a rising US Dollar on Monday as world stock markets pushed upwards from new record closing highs after the ruling government in Japan won its ‘snap’ election with a landslide.
 
The Japanese Yen sank to a 3-month low versus the Dollar, and Tokyo shares hit 21-year highs, after prime minister Shinzo Abe’s decisive victory for his so-called Abenomics policies now “clears the way” for more fiscal and monetary stimulus, designed to weaken the Yen, plus structural reforms for the world’s third largest single economy.
 
After half-a-million Catalans marched through Barcelona on Saturday in support of independence, breakaway leader Carles Puigdemont now plans to appeal to both Spain’s and the European Union courts to block the national government’s move to reclaim all regional powers.
 
“Money is important,” says former German foreign minister Joschka Fischer, writing today for Handelsblatt. “But it is not as important as Europe’s shared commitment to liberty, democracy and the rule of law.”
 
Northern Italy’s wealthy Lombardy and Veneto regions meantime voted to call for greater autonomy from Rome over tax and spending.
 
“The gold market is sitting in the doldrums,” says a note from brokerage Marex Spectron’s London bullion desk, “with little to no excitement in the world to push it one way or another.
 
“As such, the price is drifting lower and is purely following Dollar moves, especially Dollar-Yen.”
 
Chart of gold priced in Dollars vs. the Dollar-Yen exchange rate. Source: St.Louis Fed
 
Increasingly mirroring the Dollar’s FX value on the currency markets over recent decades, gold priced in Dollars has so far in 2017 shown a 5-week correlation with the US currency’s exchange rate in Japanese Yen of minus 0.83.
 
That would read -1.0 if gold and Dollar-Yen moved perfectly opposite to each other.
 
Over the previous 5 years that statistical relationship averaged a reading of -0.46, having averaged -0.26 over the first 10 years of this century.
 
“Gold [was] under pressure right from the market open as the greenback pushed higher against the Yen,” says today’s trading note from Swiss refiners MKS Pamp’s Asian team.
 
“The sharp move lower was generally well supported toward $1274-1275, while a mild bid tone out of China buoyed the metal in early Shanghai trade.”
 
Shanghai premiums, over and above comparable London quotes, today held little changed in line with the historic average of $9.50 per ounce on the city’s key Au(T+D) contract.
 
For US Dollar traders, “Support remains unchanged at $1275.80, the 100-day moving average,” says the latest technical analysis of gold prices from Canada’s Scotiabank – itself now “weighing” a decision whether or not to sell its centuries-old London bullion market making and clearing division Scotia Mocatta.
 
Monday’s surge in Tokyo’s Nikkei index still left Japanese stocks 40% below the all-time peak of 1990.
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