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Author Archives: City Gold Bullion

Gold ETF Impact on Price 'Intuitive' Says SocGen as Euro Gains Before ECB News

September 8, 2016
Latest News
GOLD PRICES held shy of 3-week highs in London on Thursday, trading at $1347 per ounce as the US Dollar fell near 2-week lows against the Euro ahead of today’s European Central Bank decision on interest rates – now negative for commercial banks using the ECB’s deposit facility – and quantitative easing.
 
Silver retreated from yesterday’s near 4-week highs at $20.13 per ounce, recovering half of an overnight 40 cents drop.
 
Wednesday’s new all-time high global stockmarkets saw the giant SPDR Gold Trust (NYSEArca:GLD) shrink by half-a-tonne to just less than 952 tonnes as stockholders liquidated shares.
 
Globally however, exchange-traded trust-fund products backed by gold grew their bullion holdings 1.2% in August according to new data published Thursday by the mining-backed World Gold Council market-development organisation, reaching 2,297 tonnes.
 
Slipping a little over 1% by Dollar value as gold prices retreated, that was still the largest quantity of ETF-held bullion since May 2013 – midway through the metal’s worst quarterly price crash in 3 decades.
Chart of global gold ETF-type holdings, courtesy of the World Gold Council
 
“The increase in European gold ETFs countered declines in North America and Asia,” says the World Gold Council.
 
“ETF flows are incredibly volatile when compared with other [gold-market] fundamentals,” says a new research note from Michael Haigh’s commodity team at French investment bank and London bullion market-maker Societe Generale.
 
Analyzing the impact on gold prices of ETF holdings and also the size of net bullish betting by hedge funds in Comex gold derivatives, “The results are extremely intuitive,” the research concludes, finding that – for a 10% increase or decrease in ETF flows, the gold price would rise or fall “by approximately 3%” from current levels, “or about $41 per ounce.
 
So if ETF gold flows “fell back to the low experienced in January 2016,” SocGen concludes, “[then] according to our model the gold price would drop by 13% to $1168 per ounce – only $102 off” the metal’s 6-year lows of the previous month.
 
Looking beyond ECB’s decision to the US Fed’s meeting ending 21 September, “The [US jobs data] out last Friday, followed by poor ISM manufacturing and now poor ISM non-manufacturing has thrown a real spanner in the works regarding the next Fed rate hike,” says a trading-desk note from Swiss refiners MKS Pamp.
 
“We see more potential upside from here with September now looking highly unlikely for rates to move higher,” it adds, saying that the gold price’s “next important resistance sits well within striking distance at $1353.50 – the downtrend dating back to July 6’s post-Brexit high, which has held…4 times now.”

Gold Bars Flood into GLD as Odds of Fed Rate-Rise Fade, Beijing's Demand Weak as China's FX Reserves Shrink

September 7, 2016
Latest News
GOLD BARS in London wholesale trade rose near 3-week highs against a weakening Dollar and touched 1-month highs against the Chinese Yuan on Wednesday, as poor US data saw traders cut their bets of a US Fed rate rise at the September meeting in 2 weeks’ time.
 
Service-sector activity in the US suddenly slowed last month to its weakest level in more than 6 years, the private-sector ISM report said Tuesday, with the New Orders Index registering a plunge of 8.9 percentage points.
 
Regaining an overnight break above $1350 per ounce, prices for wholesale gold bars showed their fastest week-over-week rise since the Dollar price peak of early July at 3.2% this morning, as Asian shares closed lower but European equities rose.
 
Investor demand for gold-tracking ETF the SPDR Gold Trust (NYSEArca:GLD) yesterday returned from the US Labor Day holiday to need an extra 14.2 tonnes, the heaviest 1-day inflow since immediately after the Independence Day holiday on 4th July.
 
That took the GLD’s total holdings of London Good Delivery gold bars – vaulted at HSBC bank in London and needed to back the trust’s stockmarket shares in issue – to a 1-week high of 953 tonnes.
Chart of SPDR Gold Trust (NYSEArca:GLD) bullion tonnes vs Dollar gold price
 
“No matter the exact timing of the next rate hike, we believe safe-haven demand from investors should fade as growth risks are receding,” reckons a note on gold prices from Swiss private bank Julius Baer’s wealth management division.
 
Besides its belief that the US Fed will hike rates and push the Dollar higher, Julius Baer says that 2016’s gold gains mean the metal’s “insurance benefits [now] come at a price.
 
“We would refrain from adding it to the portfolio at the current point in time.”
 
Betting on a US Fed rate hike at the September meeting in 2 weeks’ time today put the odds at less than 1-in-7, sharply down from last week’s 1-in-4 peak.
 
10-year US Treasury bond yields fell Wednesday towards 4-week lows at 1.52%.
 
The Chinese Yuan meantime rallied from near 6-year lows to the falling Dollar despite new data saying Beijing’s total foreign exchange reserves shrank 0.5% in August to a 5-year low of $3.2 trillion.
 
The People’s Bank meantime grew China’s state gold reserves by less than 5 tonnes in August – markedly below both the last year’s average 13.7-tonne monthly addition and the previous 6 years’ average 8.4 tonnes per month – as gold bullion bar prices averaged new 3-year highs at $1341 per ounce.
 
That still took China’s total gold bar reserves to a new record 1,833.5 tonnes – the 5th largest national hoard behind France, Italy, Germany and the United States.
 
Shanghai’s benchmark gold price today fixed at ¥290 per gram, offering importers only a modest premium above wholesale London gold bar prices of $1.50 per ounce, down from the recent $2.50 average.
 
Silver prices today tracked and extended the move in gold bullion bars, touching $20 per ounce for the first time since mid-August and gaining 8.7% from last week’s 2-month lows.

Gold Prices Near 2-Week High, Threaten Indian Harvest Demand as Western Investing Jumps

September 6, 2016
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GOLD PRICES rose against all major currencies Tuesday morning in London, nearing 2-week highs in US Dollar terms as world stockmarkets pushed higher together with bond prices.
 
Wholesale gold bullion prices touched $1335 per ounce, a 2-year high when first seen on the UK’s Brexit referendum result in late June, and adding over $10 for the week so far.
 
Silver rose to its strongest price since 19 August at $19.60 per ounce as copper rallied, but agricultural and energy commodities slipped.
 
The Reserve Bank of Australia meantime kept its key interest rate at the new record-low 1.5% reached last month.
 
Betting on US interest-rate futures ahead of the Federal Reserve’s September meeting now says the chance of no change until New Year 2017 has fallen to 2-in-5, with the odds of a hike in 2 weekss’ time rising to 27%.
 
“The idea that the Fed is going to move, if not in September but in October, is limiting people from buying gold,” reckons UBS Wealth Management’s Dominic Schnider, speaking to Reuters from Hong Kong.
 
Users of BullionVault, the largest gold and silver market online, grew their net gold investing to almost half-a-tonne of bullion last month, the heaviest net addition in nearly four years.
 
Some 89% of the provider’s 63,000 users worldwide live in Western Europe or North America.
 
Gross sales of American gold Eagle coins to authorized dealers meantime rose to 1.8 tonnes in August, data from the US Mint show, after dipping on July’s strong price rise.
 
That was over 40% down on August 2015 however, when month average gold prices fell to what was then a new 5-year low beneath $1120 per ounce.
 
Gold prices would fall another 4% to December 2015’s monthly level of $1068 – the lowest average since October 2009.
 
August 2016 saw month-average gold prices edge 0.3% higher from July, reaching a 3-year high with their fouth consecutive monthly rise.
 
US Dollar gold price monthly average percentage change
 
“Unless gold prices rise further, higher rural disposable incomes will revive [India’s] demand for gold after the [post-monsoon] kharif harvest,” says Aditi Nayar of the Moody’s-owned ratings agency ICRA Ltd in Mumbai.
 
But with gold imports to the former No.1 consumer nation down to the lowest levels since New Delhi imposed a de facto ban in mid-2013, “Consumption of other items will also rise [on a good harvest],” says Nayar, “including consumer durables and non-durables, restricting the surplus available that can be channelled into gold.”
 
“Given the [upwards gold price] trend over the past few months and the outlook on inflation,” agrees investment group Kotak Securities’ economist Suvodeep Rakshit – also speaking to LiveMint – “the revival in gold demand may not be very high…historically” ahead of the key Diwali festival at the end of October.

Gold & Silver Flat for Labor Day But 2016 Price Jump Shakes Up India, China Bullion Markets

September 6, 2016
Latest News
GOLD and SILVER prices rose in China but held flat with last week’s close in Dollar terms in London on Monday, trading quietly as the US marked the end of summer with the Labor Day holiday.
 
India’s stock market lagged a sharp gain in Asian equities, while crude oil initially jumped but eased back after Russia and Saudi Arabia signed an agreement on the sidelines of the weekend’s Hangzhou G20 summit in China, potentially allowing a “freezing” of oil production.
 
The British Pound meantime jumped to a 7-week high – capping gold prices for Sterling investors at £995 per ounce – after new survey data said UK services sector activity rebounded from the Brexit referendum drop at the fastest pace in at least two decades in August.
 
“Strong expansion,” commented Sky TV’s economist Ed Conway. “UK really does not look in recession.”
 
“Input prices rose at the sharpest rate since November 2013,” says the Markit/CIPS UK Services PMI survey.
 
Insurance market Lloyd’s of London said today it will move European Union work onto the Continent if Brexit sees the UK lose access to the single market in financial services.
 
Noting that half of Japan’s direct investment in the EU currently goes into the UK, the Ministry of Foreign Affairs in Tokyo on Friday published 15 pages of requests for London and the remaining Union to “heed [and] respond” to
 
“Nothing much has changed apart from the price,” says London gold and silver broker David Govett at Marex Spectron after Friday’s weaker-than-expected US jobs data.
 
“The market is still range bound and very much beholden unto the Fed and the Dollar.”
 
“Precious all opened where they left off on Friday,” says Swiss refiner MKS’s Asian desk, “with some light profit taking to start the day.”
 
Profit-taking by Chinese wholesalers is thwarted by Beijing’s ban on bullion exports says the South China Morning Post today, reporting a rise in gold smuggling to Hong Kong, with customs officers in the city – where young ‘radical’ politicians looked on track to maintain the pro-democracy party’s one-third veto bloc in local elections held this weekend – seizing 2.2 tonnes of gold and silver so far in 2016.
 
“Smugglers are paid to help [sellers] take the precious metals into Hong Kong to cash in,” the SCMP quotes a ‘source’.
 
“There were no seizures last year and in 2014.”
 
After a global surge in scrap gold recycling on 2016’s price jump, old gold sales in India – formerly the world’s No.1 consumer market – have fallen sharply as bullion prices have retreated over the last 2 weeks, says the Economic Times.
 
“General sentiment in the market [is] that prices of gold will go up during Diwali,” says RiddiSiddhi Bullion director Mukesh Kothari, referring to India’s traditionally heaviest gold-buying festival, falling this year at end-October.
 
“That is compelling sellers to hold back their decision to offload household old gold.”
 
Weekly US trading data released late Friday meantime showed the value of net-bullish betting by money managers in US Comex gold futures and options has dropped 20% since hitting a 5-year peak at $38.8 billion in early July.
 
Silver’s net bullish position amongst the ‘Managed Money’ category of traders has sunk almost 30% from its new all-time record high set 4 weeks later.
Chart of CFTC data on Managed Money's net bullish silver betting, $bn
 
The giant SPDR Gold Trust (NYSEArca:GLD) meantime ended last week needing almost 19 fewer tonnes of bullion to back its shrunken number of shares in issue, dragging the trust fund’s total assets down to a 2-month low of 937 tonnes.
 
Still 46% larger from New Year, that pulled the GLD’s 3-monthly addition down to its lowest weight growth since February beneath 57 tonnes.

Gold Investing 'Strongly Inverse' to S&P500 But Both Rise as US Non-Farms Jobs Miss Forecasts

September 3, 2016
Latest News
GOLD INVESTING prices recovered for a second session against a weakening US Dollar on Friday, again moving higher after new US economic data came in weaker than expected, cutting the odds that the Federal Reserve will raise interest rates this month.
 
Betting on a US Fed hike from 0.50% to 0.75% at the Fed’s 21 September meeting fell from 1-in-4 to almost 1-in-5 after the Bureau of Labor Statistics estimated only a net 151,000 jobs were added to non-farm payrolls in the world’s No.1 economy in August, sharply below Wall Street’s 180,000 forecast.
 
Gold erased the last of this week’s earlier 1.5% investing losses in Dollar terms as the US currency fell on the forex market, and also got back to last Friday’s finish against the Euro, Swiss Franc, Canadian and Australian Dollars.
 
US stock markets gained – with European shares rising 1.7% from last Friday – as did government bond prices and commodities.
 
Crude oil bounced 2% but still headed for a weekly loss of 8%.
 
Silver bullion jumped ahead of gold investing prices following the US jobs data, regaining the last 2 weeks of losses at $19.25 per ounce.
Chart of US Dollar gold and silver prices, rebased to 100 = 5 June 2016
 
“Thursday’s data led price recovery [looked] promising for gold,” said the trading desk at Swiss refiners MKS Pamp overnight, with yesterday’s larger than expected US jobless benefits claims figure providing a “catalyst” for gold’s rebound from new 2-month lows.
 
“[But] the weak ISM [manufacturing] data was the key protagonist.”
 
“US economic growth is weak yet the labour market is tight,” writes French investment bank strategist Albert Edwards – a “juxtaposition [now] keeping the Fed in a quandary on whether to raise interest rates.
 
“Only the US consumer is keeping the economy out of recession…Business investment’s contribution to GDP [is] now consistent with recession.”
 
“Correlation over the last 60 sessions between Comex Gold contracts and the S&P500 stock index is minus 0.61,” writes Yuichi Ikemizu, head of precious metals at ICBC Standard Bank’s Tokyo office – “a very strong inverse correlation…the strongest of the past 10 years.”
 
A perfectly positive correlation, with two prices moving together in lockstep, would read +1.0, while a reading of -1.0 would signal a perfectly inverse relationship.
 
Investing stress now shows when gold goes up, says Ikemizu, but if the strongly negative correlation continues, gold’s drop could be “very strong when the US stock market goes up.”

Gold Price Hits Post-Brexit Low in GBP on Manufacturing Jump, GLD Shrinks But 'Risks Ahead'

September 1, 2016
Latest News
GOLD PRICES held at 2-month lows against the Dollar and fell near post-Brexit lows for UK investors in London trade Thursday as world stockmarkets rose despite worse than expected global manufacturing data.
 
Commodities rallied from yesterday’s sell-off, with silver holding unchanged on the week so far at $18.68 per ounce.
 
Japanese manufacturing shrank again, while Chinese activity held flat on both the NBS and Caixin surveys and Eurozone growth slowed.
 
The British Pound, however, reversed the last of August’s drop versus the Euro, and touched 1-month highs versus the Dollar, after UK manufacturing activity showed a marked jump in August from the post-Brexit drop on Markit’s PMI survey.
 
That drove the gold price in Sterling down to £985 per ounce – fully 8% below the 3-year high hit immediately after the UK’s referendum decision to quit the European Union was announced.
 
Gold priced in US Dollars traded at $1306.
 
“The next few months could be a lot ‘riskier’ for developed-country financial assets than the past few months,” writes FX strategist Steven Barrow at Chinese-owned ICBC Standard Bank in London.
 
“Monetary policy divergence looks as if it will resurface again as the Fed goes in the opposite direction to everybody else. We know that this can cause investors to panic.
 
“There’s also increased political risk, most notably in US elections and the Italian referendum on constitutional change.”
 
After US employers added more staff in August than analysts forecast on Wednesday’s private-sector ADP Payrolls estimate, betting in the futures market continues to price the odds of a September Fed rate rise at 3-to-1 against.
 
US Treasury bond prices slipped overnight, pushing 10-year yields up near 2-month highs at 1.60%.
 
That remains far below the 2.30% level hit when the Fed finally made its first rate hike from zero in mid-December last year.
 
Gold prices today traded 21% higher against the Dollar from that date.
 
Chart of US T-bond yields vs gold prices
 
Gold-backed ETF the SPDR Gold Trust (NYSEArca:GLD) yesterday saw its second-heaviest outflow of bullion of 2016 to date, shedding more than 12 tonnes as investors liquidated 1.3% of the trust fund’s shares.
 
Taking total GLD holdings down to a 2-month low of 943 tonnes, that still left the world’s largest exchange-traded gold trust larger by almost one-half from the end of 2015.
 
One months after the failed coup attempt in Turkey, the central bank in Ankara today said it is raising the amount of gold which commercial banks can deposit with it, potentially growing the existing pile of privately-owned gold bullion counted amongst its reserves by one-sixth.

Gold Bullion Near $1300 Two-Month Low as US Jobs Beat Forecast, Real Rates & China 'Key'

August 31, 2016
Latest News
GOLD BULLION slid to 2-month lows near $1300 per ounce against a rising US Dollar in London trade Wednesday, on track for an August loss as US jobs data beat expectations.
 
Commodities retreated but global stock markets ticked higher while US Treasury bonds slipped, nudging yields higher, after new data ahead of Friday’s official US jobs estimate said employers added 177,000 net jobs this month, just beating analysts’ average forecasts but down from July’s strong growth.
 
Betting in the futures market continued to put the odds of a US Federal Reserve rate hike at the September meeting 3 weeks from today at 1-in-4.
 
Heading for only its second monthly loss of 2016 to date, gold bullion on Wednesday morning recorded its lowest London benchmark since 28 June at $1314.45 per ounce, down some 2.1% from July’s 3-year monthly closing high, before sliding towards $1300 per ounce.
 
That still put the metal some 23% above the end of 2015.
 
Chart of gold price in US Dollars per ounce, month-end London benchmark
 
“[The] neckline of the broad inverted head and shoulders at $1307/$1300 should be a key level,” says the latest technical analysis of gold prices from French investment and bullion market-maker Societe Generale, pointing to the bullish chart pattern it saw in the metal’s sharp recovery of early 2016.
 
“Gold hit its [6-year] low the day right after the Fed raised rates [end-2015],” says Martin Murenbeeld, chief economist for Dundee Economics, talking to Kitco News, “but since then, gold has been rising strongly.”
 
Forecasting a “knee-jerk” but temporary sell-off in gold bullion if the US central bank does again raise rates any time soon, “For gold [the] important rate is what we call the real interest rate.”
 
After accounting for inflation, real US interest rates have dropped sharply since the Fed’s first and so far only rate hike of the last decade, made in December last year, with real 10-year US Treasury bond yields falling from 1.57% to 0.62% net of the official CPI inflation rate.
 
“Both the level of the US Dollar and US real rates reflect greater optimism about the US economy [than in 2011],” says a precious metals note from Australian financial services group Macquarie, meaning that gold’s previous record highs “seem out of reach…though concern over both [the currency and economy] will provide a firm underpinning.
 
“Unusually, how much gold can go up by might finally depend on supply and demand ‘fundamentals’, and while likely to improve, they will do so only slowly.”
 
“Overall, we think the Chinese gold market will continue to grow,” says a new analysis of the No.1 mining and consuming nation from Canadian bank RBC’s commodity strategist Christopher Louney, “but lower net demand and continued supply growth means that the shortfall should narrow this year,” helping curb world prices until jewelry buying turns high next year.
 
Lower Chinese supply, rather than growing demand, explains why Shanghai prices have risen above global quotes but delivery volumes have fallen, says a note from specialist analysts Thomson Reuters GFMS.
 
“Delivery volumes on the SGE were down to 118 tonnes in July, the seventh consecutive monthly decline on an annual basis [yet] the premia to the LBMA Gold Price edged higher, averaging $5.50 per ounce in July from $3.77 a month earlier” and then rising to $5.60 as delivery volumes hit new 2016 lows.
 
Silver prices also retreated with gold bullion on Wednesday, but held just above Monday night’s new 2-month low of $18.62 per ounce in spot trading.

Gold Bars Near 5-Week Dollar Low as Fed's 'Full Employment' Rate-Rise Hints Meet Falling Inflation

August 30, 2016
Latest News
GOLD BARS traded in London’s wholesale market recovered from their fourth dip below $1320 per ounce in 4 days on Tuesday, returning from the UK’s summer Bank Holiday near 5-week lows as betting rose that the US Fed will raise its key interest rate at this month’s FOMC meeting despite an expected slowdown in US jobs creation.
 
Wall Street consensus says Friday’s official estimate of non-farm payrolls will show a rise of 180,000 for August, well down on July’s surprise 255,000 jump.
 
The Federal Reserve then meets to announce policy on 21 September.
 
“Gold remains range-bound within a descending triangle over the past month,” said a note from traders at gold refiner and bar manufacturers MKS Pamp.
 
“With investors pricing in a greater likelihood of a Fed rate increase before year end, pressure is likely to continue to weigh. Next focus for traders will be on…Friday’s employment data to gain more insight.”
 
“Every figure will be scrutinized and every Fed speaker will be closely followed,” agrees a trading note from futures and wholesale gold-bar brokerage Marex Spectron’s London office.
 
“Forget normal fundamentals, forget technicals, forget most things that all of us are used to watching for clues. Just watch the data out of the US and all the headlines that go with it.”
 
“While giving a nod to improving economic conditions,” said Japanese conglomerate Mitsubishi’s analyst Jonathan Butler in a note last week, “the Fed [must] emphasise the data dependency of any rate decision, and how dampened inflation expectations will warrant further patience before raising rates.
 
“All this is essentially favourable for bullion in the medium term.”
 
US Fed vice-chairman Stanley Fischer told Bloomberg News on Tuesday that the US is close to full employment, repeating a comment he made 12 months ago.
 
August 2015 also saw Fischer call low inflation a “temporary” phenomenon, something he again repeated in a speech last week.
 
But “the latest data show a deceleration in inflation,” counters The Economist magazine, “clock[ing] in at 0.8% year-on-year in July” while financial markets and consumer surveys also point to falling inflation expectations.
 
“Not even the FOMC seems to believe low inflation is transitory,” the magazine goes on, noting that – amongst US Fed voting members – the highest forecast rate of inflation “is just 2.1%, arriving by the end of 2018.”
 
US and other major government bond prices held firm Tuesday, but UK Gilts fell – pushing interest rates higher – after new data showed the UK’s broad money supply growing 7.0% per year in July.
 
That was the fastest pace since September 2007, when the collapse of over-geared mortgage lender Northern Rock marked an early stage in the global financial crisis.
 
The Euro today retreated to 1-week lows at $1.1165 on the forex market, helping edge gold bar prices for Eurozone investors back above €1180 per ounce – some 1.2% above last week’s 2-month low. 
 
Shares in Apple Inc. (Nasdaq:AAPL) meantime slipped 1% in pre-market trade after the European Commission ordered the Irish government to demand €15 billion in back taxes, undoing what the EC claims was a “sweetheart” deal to attract the tech giant’s European HQ and secure jobs.
 
Ireland’s finance minister said Dublin “profoundly disagree[s]” and Apple Inc said it will also appeal the decision.

Gold Prices Halve Weekly Loss Even as Case for Fed Rate Hikes 'Strengthens'

August 30, 2016
Latest News
GOLD PRICES rebounded on Friday morning in London from a two-day $20 dip as the US Dollar retreated and European stocks fluctuated before the highly anticipated speech of Fed Chair Janet Yellen at the Jackson Hole symposium, writes Thomas Podvin at BullionVault.
 
Asian equities fell and Europeans stocks fluctuated, while the Bloomberg Dollar Index that measures the strength of the greenback against several other major currencies eased back.
 
So far this Friday the Pound versus the US Dollar was set for a weekly gain whilst the Euro/Dollar cross remained almost unchanged after a jump earlier this week was followed by a dip.
 
Janet Yellen’s address at 3pm London time on Friday is highly anticipated as investors wait to see if she gives any signals regarding Federal Reserve monetary policy and a new interest hike before the end of the year.
 
Analysts see the choice for a hike or not as very much dependant on the economic situation of the US, the rate of inflation matching the official target and employment figures.
 
“Speculative investors seemed to have abandoned their long gold positions,” said Bart Melek, head of global commodity strategy for TD Securities in Toronto, as Yellen may hint at a hike in her address in Wyoming.
 
“Some gold observers are even arguing that the FOMC may increase rates as early as September,” added Melek.
 
“The outcome of the Fed’s Sept. 21 meeting will be largely determined by the tone of Janet Yellen’s speech at Jackson Hole,” said an analyst, pointing to the confident tone of some of Yellen’s colleagues regarding a rate hike in the past few days.
 
“You can’t take on risk ahead of important events,” said Takashi Ito an equity strategist at Nomura Securities in Tokyo, as there is no way to know if Yellen will make any reference of a rate hike in her speech.
 
“It’s difficult to predict. If she does make more hawkish comments the market could be chaotic in the short term,” continued Takashi Ito.
 
“Wariness ahead of Yellen’s speech gave gold a leg up” as the yellow metal in Dollars was set, before Yellen’s speech, for a small rebound and a weekly loss of 1.2%, marking the first retreat on the week since early August.
 
Gold prices for GBP and Euro investors also showed a weekly loss of 2.1% and 0.9% respectively on Friday morning. 
 
While in the past two days gold and silver prices were significantly under pressure with the firm greenback weighting on the precious metals, ” Clearly some market participants are positioning themselves ahead of Yellen’s speech,” said Frankfurt Commerzbank in a daily note, indicating they were sceptical about any clear indications of the next rate hike today.
 
With gold price resistance on a downward trend line from the post-Brexit referendum high in early July, the “metal has failed several times to move through this trend and could fall under further pressure should Yellen’s speech turn materially hawkish,” said Swiss industrial and trading services group MKS Pamp.
 
Silver prices dropped to an 8-week low of 18.69 per ounce, a level last seen a week after the Brexit referendum, as platinum was also lower on the week on Friday morning.
 
UPDATE, 2pm: The American economy grew slower than previously reported but in line with the consensus in Q2 2016 according to annualised GDP figures released at 1.30pm London time by the US Bureau of Economic Analysis.

UPDATE 4pm: Gold in Dollars whipped and rose to $1342 per ounce, a slightly higher level than last week’s close, before retreating to $1333 but still more than halving this week’s loss.

Futures gains extended as Yellen declared “the case for an increase in the federal funds rate has strengthened in recent months” in Jackson Hole this afternoon. Gold for UK and Eurozone investors also rebounded on Friday afternoon.

 

Gold Prices Drop Ahead of Jackon Hole Clues on US Rate Hike, Swiss Gold Exports Jump on ETF Demand

August 30, 2016
Latest News

GOLD PRICES were flat Monday morning in London and then dropped sharply in the afternoon to $1328 per ounce ahead of the Jackson Hole Symposium which starts tomorrow, writes Atsuko Whitehouse at BullionVault.

Markets are awaiting Janet Yellen’s speech on Friday for clues whether the Federal Reserve will raise rates this year.

Silver also retreated to $18.66 per ounce adding to Monday’s 2% drop.

Silver ETFs had their highest daily inflow since the beginning of July on Monday of 103 tonnes, setting a new record high of 20,690 tons according to Commerzbank.  

Holding in the gold ETFs tracked by Bloomberg were topped up by 55 tonnes in July as Switzerland had exported 80 tonnes of gold in July to the United Kingdom where a number of gold ETFs store their gold.

The United Kingdom was the biggest recipient of Swiss gold for a fifth straight month. Switzerland exported a total of 192 tonnes of gold in July, the largest volume since December according to data published Tuesday by the Swiss Federal Customs Administration,

Oil prices fell Wednesday morning on an unexpected increase in U.S. crude stocks yesterday after gaining this week on new reports that Iran might be willing to participate in an OPEC-led production cap. 

Asian Shares were mixed with the Nikkei Stock Average rising 0.61% on the back of weaker yen due to the US Dollar broad strength.  The South Korean Kospi was down 0.30%, HK Hang Seng down 0.77% and Shanghai SSE composite also down 0.12%.

European shares rose this morning with the FTSE250 up 0.27%, Dax up 0.56%, CAC 40 up 0.73% and IBEX up 0.81%. The FTSE100 on the other hand fell 0.10% after the news that British miner, Glencore, reported a falling underlying profit and a lowering of its debt target.

The Dollar index edged 0.1% higher to 94.63 as the market eagerly awaits Janet Yellen’s speech this Friday at Jackson Hole.

Expectation of a rate hike has been building according to the FedWatch Tool. The probability of a rate rise in September 2016 has risen 21% up from the previous figure of 15%. Last week this figure was 9%.

Barclays economist Michael Gapen said “Yellen could use her Jackson Hole speech to deliver a concrete message that a rate hike will happen in the coming months if U.S. job growth stays strong. Otherwise, investors will keep doubting future rate increases.” Reuters reported.

“They question whether she will ever see data that will justify a rate hike,” continued Gapen, “I think she herself has a credibility problem with markets.”

Michael Woodford, a Columbia University economist however, stated to Bloomberg “I expect that she would want to preserve the option of moving in September without giving any very definite signal that they are ready to do it.”  Mr Woodford’s 2012 paper at Jackson Hole helped to persuade the Fed to use more explicit forward guidance on interest rates.

As for major economic data today, US Existing Home Sales will be released at 14:00 GMT.  Yesterday’s US New Home Sale beat expectations and was the highest level since 2008.  US stocks closed near record highs as the housing data help boost stocks.

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