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Gold Prices Whip with Silver, Euro on Weak US Jobs Data, 'Too High' in Rupees for Key Indian Festival

May 7, 2016
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GOLD PRICES briefly recovered the week’s 1.6% losses against the Dollar on Friday in London, spiking to $1293 per ounce after US government data said new job creation badly missed analyst forecasts last month.
 
Gold then slipped back, however, trading down to $1287 as silver retreated to $17.40 per ounce – down some 2.5% from last Friday.
 
The Bureau of Labor Statistics estimates that US non-farm payrolls expanded by just 160,000 in April, the fourth slowest monthly growth  of the last two years.
 
The Euro also spiked versus the Dollar on the jobs news, regaining all of Thursday’s 1-cent drop only to give it back again as European stock markets extended their decline to worse than 1% for the day.
 
Ten-year US Treasury yields edged higher from an overnight drop, but headed for their lowest weekly close in a month at 1.75%.
 
US consumer prices were last seen rising at 1.1% annualized by government statisticians.
 
“A weak jobs release is more likely to boost the yellow metal,” said London bullion market-maker HSBC’s analyst James Steel ahead of Friday’s data, “[but] we sense the path of least resistance for gold is lower.
 
“Even if the jobs number is low and gold jumps higher, physical demand in Asia remains quite weak. The rally is heavily reliant on investor interest.”
 
Investors yesterday grew their shareholding in the SPDR Gold Trust (NYSEArca:GLD) to need a further 4 tonnes of bullion backing, taking the total to a new 2.5-year high at 829 tonnes even as gold prices slipped on the day.
 
Last week’s data on trader positioning in US gold futures and options showed hedge funds and other speculative players trimming their net bullish position ahead of the Federal Reserve’s April meeting, when it held rates at the 0.5% level reached after 7 years at zero in December.
 
The ratio of speculators’ bullish to bearish bets, however, rose above 5:1 – a level seen in only 5 weekly positioning reports from regulator the CFTC since 2012.
Chart of CFTC data for speculative bull:bear ratio in US Comex gold futures and options
 
Meantime in India – the world’s second-largest consumer market for gold in 2015, according to analysts Metals Focus – this weekend’s Hindu festival of Akshaya Tritiya finds jewelry retailers “expecting marginal growth in sales compared to last year,” says All India Gems & Jewellery Trade Federation chair Sreedhar GV.
 
“Prices are ruling very high” in Rupee terms, he said, up more than 11% from 3 months ago, while demand is being dented by “the present dry weather conditions in the country.”
 
Many analysts see a link between Indian gold demand and the level of monsoon rainfall, with the size of the earlier spring harvest also affecting rural incomes and therefore gold sales.
 
A note from Australia’s ANZ Bank meantime points to an extended “closed season” for Hindu weddings in summer 2016, with the Chaturmas period – when there are no auspicious days on the calendar – running right through May to October.
 
Over in China, the No.1 consumer market, Shanghai gold contract volumes held firm Friday as prices edged 0.3% lower overnight.
 
Shanghai’s new, separate Yuan gold benchmark price has, over the last week, averaged a premium of just 28 cents in US Dollar terms versus live quotes for London settlement.
 
That’s markedly nearer world prices than the $2.25 per ounce premium shown by the SGE’s main domestic gold contract over the last 18 months.

Gold Prices Rally Ahead of Key US Jobs Data as China's Gold Demand Falls, Trading Jumps

May 5, 2016
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GOLD PRICES recovered one-third of this week’s 2.4% drop from 16-month highs above $1300 per ounce on Thursday in London, rallying as the Dollar paused its rise following weaker US jobs data.
 
Silver again extended the move in gold, jumping 2.5% from yesterday’s 1-week low to touch $17.61 per ounce as the start of New York trading approached.
 
Following yesterday’s shock miss on the private ADP estimate, Friday will bring the US government’s monthly estimate of net job creation – a data point often spurring strong volatility in currencies and financial markets, including gold and silver prices.
 
New data today showed the number of jobless benefits claimants rose again last week from mid-April’s four-decade low.
 
World stock markets meantime held flat, curbing 3 days of losses, while bond prices slipped but commodities jumped, led by a 4% surge in crude oil.
 
“The [precious metals] complex feels overdone,” says London brokerage Marex Spectron, repeating its comment to clients earlier this week, “but it may be a while before any correction happens.
 
“The [gold price] still seems to be happy meandering around at these levels, and it will take some form of external factor to move it conclusively.”
 
New data Thursday from the China Gold Association said trading turnover on the Shanghai Gold Exchange rose 45% in the first 3 months of 2016 from the same period last year, while gold contract trading on the Shanghai Futures Exchange rose 79%, but the country’s demand for physical gold declined.
 
“Gold is approaching near key graphical support of $1264-1270,” says the latest technical analysis from French investment bank and bullion market maker Societe Generale, after meeting “resistance” at the January 2015 high of $1307 per ounce.
 
“Short term, upside is likely to remain capped. [But] it is worth underlining that gold prices, for the first time in years, breached the monthly Moving Average and the down channel [starting from 2013] on the higher side [at] $1264.”
 
“[Monday’s] new high not confirmed,” says the latest Technical Weekly from German financial services group Commerzbank, pointing at momentnum indicators after the failure to hold above $1300 per ounce.
 
“We would allow for some profit taking here…[But] provided key support holds at $1245, we still favour a recovery and a retest of the topside.”
 
Gold prices in China – the world’s No.1 miner, importer and consumer nation – today fixed at Shanghai’s new benchmark auction level with international quotes, having risen from a discount to a $2.35 premium on Wednesday.
 
Claiming a “growing influence” for the world’s second-largest economy on global gold prices, government-sanctioned trade body the China Gold Association today said the country’s gold mining output held flat in the first quarter of 2016 from Q1 2015 at 112 tonnes.
 
Gold consumption meantime fell almost 4% to 318 tonnes overall, with jewelry demand dropping 14% and industrial use falling 5%, but investment demand rose sharply.
 
Gold bullion bar demand rose 22% to more than 91 tonnes, while gold coin demand totalled almost 8 tonnes, an increase of 130%.
 
The People’s Bank of China meantime issued a new rule, to start 1 June, allowing wholesalers to import or export gold up to 12 times using 1 permit, rather than applying separately each time – a move aimed, according to the Shanghai Daily, at “increas[ing] bullion imports.”
 
China, like world No.2 consumer India, bans the export of gold bullion, requiring some manufacture into jewelry or other items before gold can be shipped out.

Gold Bullion Bounces as Dollar Falls on Worst US Jobs Data Since Jan 2014

May 4, 2016
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GOLD BULLION dipped below $1280 per ounce in London trade Wednesday, retreating more than 2% from Monday’s near 18-month high before jumping over $10 after new data showed the US economy added the fewest jobs since January 2014 last month.
 
World stock markets fell once again, and the US Dollar slipped from its highest FX rate versus the Yen in more than a week, also touching a fresh 9-month low versus the Euro.
 
That drove the price of gold bullion for Eurozone investors down to €1110 per ounce – a level first seen in mid-February during this 2016 upturn – until popping 0.8% higher after the US employment data from private-sector payrolls provider ADP missed analyst forecasts of 196,000 net jobs with the lowest figure in 26 months at just 156,000.
 
Chart of ADP Payroll Services monthly net US jobs estimate, via FXStreet.com
 
Silver meantime extended the drop in gold bullion prices, falling near 1-week lows beneath $17.20 per ounce to drop almost 5% from Monday’s 16-month top, before jumping to $17.40 on the US jobs news.
 
“The signals that the gold rally has gone too far too quickly [have] increased in number and intensity,” says analyst Tom Kendall at Chinese-owned commodities bank, bullion market-maker and London benchmark participant ICBC Standard Bank.
 
Kendall points to a surge in demand for bullish options contracts, a widening premium for August futures over June, and a bump to $2 per ounce in exchange for physical contracts – all on a new 6-year high in total open interest in Comex gold derivatives.
 
“At the same time,” ICBC Standard Bank’s analyst adds, “another project-related [gold miner] hedge…was executed” to sell future production at today’s Canadian Dollar price, currently 15% higher from a year ago.
 
Gold miner hedging rose to 2009 levels in the first quarter of 2016, according to specialist analysts Thomson Reuters GFMS.
 
Amongst investors and speculators, “The market is very long,” agrees London brokerage Marex Spectron’s David Govett, also noting “profit taking and some light [gold mine] producer selling” on Tuesday’s failure to hold above $1300 per ounce.
 
“Without fresh stimulus…[gold] is going to find it hard to continue on its upward trajectory.”
 
Looking at the key Asian consumer nations, “The Indian market remains very subdued,” Kendall concludes, “and the Shanghai arb has dropped below $2.00.”
 
Today’s Shanghai Gold Price saw China’s new benchmark rally from a discount to comparable London quotes, fixing some $2.35 per ounce higher than international prices at the afternoon auction.
 
But the rising gold price will “smother” demand from India, says Bloomberg, with gold bullion imports already two-thirds lower last month from April 2015 according to Indian government-Swiss refiner joint-venture MMTC Pamp, down below 20 tonnes.
 
“Jewellers [are] betting on Akshaya Tritiya sales to clear piled up inventory,” says the Economic Times of India, quoting various industry forecasts for perhaps 2-3% growth from the same Hindu spring festival last year down to a possible decline of 15-20%.
 
“This year, Akshaya Tritiya falls on Monday [9 May],” says trade-body the IBJA’s vice-president Saurabh Gadgil. “So, we are getting a full weekend and sales will definitely pick up.”

Gold Price 'Hits Resistance at $1306' as GLD ETF Adds Most Metal Since 2011 Peak, US Attacks 'FX Manipulators'

May 3, 2016
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GOLD PRICES held unchanged from last week’s close in London trade Tuesday, returning from the May Bank Holiday at $1295 per ounce as world stock markets fell with a weakening US Dollar.
 
European stock markets returned from May Day to drop 1.5%, while commodity prices extended yesterday’s 1% fall.
 
Tokyo’s Nikkei index yesterday sank over 3% to start Japan’s Golden Week holidays more than 15% down for 2016 to date.
 
The Yen then rose overnight to its highest level against the US Dollar since September 2014, as the Reserve Bank of Australia cut its key interest rate to a new record low of 1.75%, with governor Glenn Stevens saying “Inflationary pressures are lower than expected.”
 
That drove gold priced in the Australian Dollar 2.1% higher inside 30 minutes, back near February’s 4.5-year highs.
 
“Gold rallied to a high of $1303 [on Monday] but was unable to break resistance at $1306.50,” says a technical analysis from Canada-based Scotiabank’s New York office, pointing to gold’s January 2015 high.
 
“Profit-taking emerged…[and] resistance remains at the 15-month high.”
 
The world’s largest gold-backed trust fund, however, yesterday expanded at the fastest 1-day pace since gold prices shot towards their all-time peak in August 2011.
 
The SPDR Gold Trust (NYSEArca:GLD) added almost 21 tonnes to the metal backing its shares Monday, reach 825 tonnes, the ETF’s largest size since mid-December 2013.
Chart of day-to-day changes in GLD tonnage
 
When the price of gold first pushed up through $1300 per ounce in September 2010, the GLD ETF held 60% more gold than today.
 
Monday’s economic data said US manufacturing activity retreated near the slowest since 2009 in April, while the Eurozone expanded faster than analysts forecast on the Markit PMI survey.
 
Chinese data this morning then reported the 13th consecutive month of shrinking manufacturing activity on the Caixin PMI survey.
 
“Total new orders stagnated and new export work fell for the fifth month in a row,” says a China manufacturing note from Markit.
 
The Shanghai Gold Price benchmark – launched on 19 April – today showed a discount to world spot prices for the second session running, returning from the Labor Day holiday to lag the 1.4% rise in US Dollar prices and settle $1 per ounce below comparable London quotes even as the Yuan edged higher on the FX market.
 
The US Treasury on Friday named Japan, China and Germany as “potential currency manipulators” reports the Financial Times, tracking their exchange rate versus the Dollar and threatening “remedial action” if diplomacy fails to reverse policies accused of unfairly devaluing their currencies to boost exports.
 
US Treasury Secretary Jacob Lew reportedly “warned Japan and the Eurozone at the G20 in Shanghai in February that the Obama administration is losing patience with use of beggar-thy-neighbour tactics,” said the UK’s Daily Telegraph last week.
 
“Germany in particular is coming into the US cross-hairs…[while Japan’s] Abenomics [is] ‘dead in the water’,” according to Japanese bank Nomura’s strategist Richard Koo.
 
Following gold prices lower, silver meantime “appears to have found strong resistance at the $18 level,” says Scotia, after it also retreated from Monday’s pop to the highest price since mid-January 2015 at $18.01 per ounce.
 
Revisiting yesterday’s lows at $17.48 in London on Tuesday, silver prices traded 3% below Monday’s peak.
 
The iShares Silver Trust (NYSEArca:SLV) also expanded sharply on Monday, taking an extra 56 tonnes to back the number of ETF shares in issue and reaching its largest level since December 2014 at 10,538 tonnes.

'Patient' Fed Sends Silver to 13-Month High But Demand to Buy Gold Already Dented by Q1 Jump

April 29, 2016
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BUY GOLD prices headed for their 4th sharpest weekly rise of 2016 to date on Friday in London, coming within $2 per ounce of March’s 13-month peak as world stock markets fell with the US Dollar and commodities edged higher again.
 
The Dollar fell near 3-month lows against the British Pound and 2-week lows versus the Euro after first-quarter data showed GDP across the 19-nation Eurozone – the world’s single largest economic bloc – growing faster than either the US or UK figures released earlier this week.
 
The 330-million citizen curency union, however, then slipped back into annual consumer-price deflation of 0.2% this month, led by an 8% drop in energy costs.
 
The Central Bank of Russia meantime held its key interest rate at 11%, following the US Federal Reserve and Bank of Japan in making no change to policy at this week’s scheduled meetings.
 
Prices to buy gold in Rubles fell – bucking this week’s trend for all major currencies bar the Japanese Yen – as the Russian currency rose to its highest US Dollar value since November on the FX market.
 
Dollar investors wanting to buy gold Friday saw the price touch almost $1281 per ounce, trading 3.4% above last week’s finish.
 
“I believe that, in a more interconnected world, labor slack should be assessed in a global context,” said US Fed ‘dove’ Robert Kaplan in a speech in London on Friday, “[because] excess capacity outside the US may dampen inflation pressures in the US at a given level of unemployment.
 
“The effort to ‘normalize’ monetary policy is important [but] removal of accommodation should be done gradually and patiently…From a risk-management point of view, our monetary policies have an asymmetrical impact at or near the zero lower bound.”
 
“With the Fed effectively taking itself out of the rate hiking business at least until June,” says a note from US brokerage INTL FCStone, “it seems that the path of least resistance for gold and the rest of the precious metals group is higher still over the short-term, as the Dollar sell-off shows no sign of easing.”
 
But “if Fed rate hike expectations return to the market,” counters German financial services group Commerzbank, “we see correction potential for silver…together with gold…following its sharp price rise in recent weeks.”
 
Should the US Dollar strengthen ahead of the Fed’s June meeting, “the silver price could then fall to as low as $15 per troy ounce,” it warns, pointing to speculation as the driver of this latest jump.
 
Global demand to buy gold jewelry, coins, bars and for industrial use fell 24% year-on-year amid January-to-March’s strongest quarterly price rise in 30 years, analysts Thomson Reuters GFMS said in a new report this week.
 
Dollar prices have this month averaged 5% above the Q1 average, but slipped $6 per ounce to $1240 per ounce from March, the highest monthly average since January 2015.
 
Chart of monthly average LBMA Gold Price in US Dollars
 
Silver today matched the 2016 rise in prices to buy gold, extending the week’s 4% jump to reach the highest level since January last year above $17.85 per ounce.
 
With several major gold miner companies reporting larger output this week for the first 3 months of the year, new data from China – the world’s No.1 gold mining nation since 2007 – meantime said Friday that it produced 0.8% more gold in Q1 than the same period last year.

Fed & BoJ Indecision See Gold Prices Jump, Yen Leaps as Dollar Falls with Stocks

April 28, 2016
Latest News
GOLD PRICES touched a 1-week high Thursday lunchtime in London, reaching $1259 per ounce as the Dollar fell with world stockmarkets as the Bank of Japan followed yesterday’s “no change” decision from the US Fed by also voting to maintain current policy, rather than increase stimulus.
 
Tokyo’s Nikkei index sank 3.6% by the close, while European equities dropped over 1% after the Tokyo central bank held QE money creation at a record pace of $740 billion per year, with deposit interest rates for commercial banks held at minus 0.1%.
 
Gaining 2.2% from last week’s finish against the Dollar, gold rose against all major currencies barring the Japanese Yen, which shot to 1-month highs on the FX market following the Bank of Japan’s announcement.
 
New data meantime showed Japanese household spending sank 5.3% per year in March, while consumer prices fell harder than forecast, deflating by 0.3% excluding fresh food.
 
“The market had clearly worked itself into a frenzy of expectations,” says Swiss bank Credit Suisse’s head of equity sales in Tokyo, “demanding that the BoJ take action” against slowing growth and lower inflation.
 
“In retrospect that looks like a misguided view.”
 
Silver also recovered its brief drop today from before Wednesday’s Federal Reserve statement, rising back to $17.40 per ounce – a fresh 11-month high when hit last week.
 
Gold has now risen 20% since the Fed finally raised its key interest rate after 7 years at zero in December last year. Silver has gained 27%.
 
“The Dollar is still subdued,” says Japanese conglomerate Mitsubishi’s analyst Jonathan Butler, “and falling US Treasury yields similarly are giving some upside to gold.”
 
“Resistance comes in at $1282.50,” says a technical analysis from Canada-based Scotiabank’s New York office, “and only a move above [that] March 11th high would return [gold] to the bull rally that began in December.”
 
Overnight in Shanghai – where investors in failed $5 billion asset-manager Zhongjin Capital have begun protesting the police for repayment – gold prices hit a 1-month high against the Yuan, fixing at the city’s new benchmarking auction some $6 per ounce above equivalent London quotes this morning.
 
With commodity prices rising 14% from February’s new 12-year lows, meantime, UK fund management group Schroders – which saw client assets swell to a record £325 billion by end-March ($472bn) – has launched an Alternative Solutions Commodity Total Return, investing in energy, agriculture and the metals sector according to CityWire.
 
Crude oil held steady at $45 per barrel of US benchmark WTI on Thursday, while corn held 10% above March’s new 1-year low.
 
After gold bullion rose at the fastest pace in 3 decades during the first quarter, South African investment house Investec now reckons gold will be the best performing metal or mineral in 2016.
 
Bank and trading-house analysts have meantime raised their average 2016 full-year forecasts by $90 per ounce since the start of January, reports Thomson Reuters today, up from  $1118 to $1209.
 
“The chief supportive factors,” the news-wire quotes Austalian financial group Macquarie’s analyst Matthew Turner, “are the shift in Fed stance, the weaker Dollar and the prospect of inflation.”

Gold/Silver Ratio Drops Fastest Since Start-2012 Ahead of US Fed Decision

April 27, 2016
Latest News
GOLD and SILVER bullion held firm ahead of the US Federal Reserve’s latest policy decision, due later on Wednesday, 
 
Asian stock markets slipped and European equities held flat as the start of New York trade approached.
 
The S&P 500 index of America’s largest listed businesses closed last night 3.2% higher from the last Fed announcement in mid-March.
 
Gold prices today held 1.8% higher, keeping half of the precious metal’s initial surge to $1271 per ounce made after the US central bank cut its projected number of interest-rate hikes from 4 to just 2 for 2016.
 
Silver prices meantime traded 14% above where they stood at the last Fed meeting, having extended their immediate jump by a further $2 per ounce to a series of 11-month highs.
 
“Silver remains rampant as the ratio with gold continues to drop towards 70:1,” says today’s commodities note from Chinese-owned bullion bank ICBC Standard Bank.
 
Nearing a two-decade high above 83 at this point in February, the Gold/Silver Ratio today touched 71.8 – the lowest price of gold in silver bullion terms since May 2015.
 
Dropping 14% since that recent peak, the Gold/Silver Ratio has fallen at its fastest pace since the start of 2012.
Chart of daily Gold/Silver Ratio, London prices, 205-2016
 
With silver prices now outstripping gold’s 18% gains for 2016 to date by two-fifths, “Late entrants to this party will leave with an almighty hangover,” warns ICBC Standard Bank.
 
“But it is very hard to predict when the music will stop.”
 
“[Gold’s] rally so far in 2016 [also] developed too rapidly in our view,” says a new quarterly update on world supply and demand data from specialist analysts Thomson Reuters GFMS.
 
“With poor demand from Asia we expect the gold price to ease sooner rather than later, particularly if fears about the global economy continue to abate.
 
UK economic growth retreated to the slowest quarterly pace in 3 years at 0.4% between January and March, new data said today.
 
Eurozone borrowing growth held unchanged in March, the European Central Bank reported, with new bank loans expanding by only 1.6% per year despite the ECB’s move to more deeply negative deposit interest rates and now €80 billion per month in QE bond purchases.
 
With concerns over Chinese debt defaults rising, stockmarket-traded businesses in China had to wait 70 days on average to receive payment in 2015 the Financial Times reports today, up from 60 days the year before and the longest wait since 2001.
 
Debtor days were still one-third below the level of the year 2000 however, according to financial database Wind Information.
 
The Fed is scheduled to release only a statement today, rather than the economic projections and formal press conference at which major announcements are more usually expected.

Gold Bullion Slips 'But Supported by Tame Fed' as Dollar Falls, China Default Fears Rise

April 26, 2016
Latest News
GOLD BULLION erased an overnight 0.6% gain versus the falling Dollar in London on Tuesday, trading back at $1232 per ounce as Asian stock markets shrugged off yesterday’s drop in US equities but European shares held flat ahead of tomorrow’s Federal Reserve decision on US interest rates.
 
Major government bond prices ticked higher, nudging yields down, as commodities steadied.
 
The British Pound broke new 2-month highs above $1.4550, driving the price of gold bullion down to a new 10-week low of £847 per ounce for UK investors.
 
Trading in US interest-rate bets now puts no chance on the Fed raising from 0.50% tomorrow, but the odds on a hike at the June meeting have risen above 1-in-5 – up from 1-in-6 a month ago – according to data from futures exchange CME.
 
“The more tame Fed tightening cycle, compared to expectations last year, should support gold,” says bullion market-maker HSBC’s London analyst James Steel.
 
But “investors are trimming risk ahead of the FOMC tomorrow,” says a note from commodities and bullion bank ICBC Standard – which this month became a market-making member of the London Bullion Market Association.
 
The bank also points to higher commodity trading costs in China – aimed at deterring violent price swings after steel prices zoomed 47% higher from 13-year lows in 2016 so far.
 
“Loose monetary/credit policies…are the main drivers behind the latest sharp rally, rather than improving fundamentals,” says analysis from US investment services group Bank of America-Merrill Lynch, warning that China’s “shadow banking sector doesn’t price risks correctly because of all sorts of implicit guarantees” from the Beijing government.
 
“[There’s also] rising concern (again) about corporate bond default rates in China,” says ICBC Standard Bank, after 90% of Chinese investment funds in corporate bonds lost value last week on what Bloomberg calls “concerns [about] spreading corporate note defaults.”
 
The Shanghai Futures Exchange (ShFE) said last week it is raising transaction fees for rebar steel, while the Dalian Commodity Exchange (DCE) said Thursday it is raising trading margin downpayments for iron ore contracts from 7% to 8%.
 
Amongst Western money managers, “Gold has been the primary driver of [commodity] investment flows so far in 2016,” says the UK’s Barclays Bank, “taking over from oil, which was the dominant driver in 2015.”
 
London market-maker and bullion clearing member, Barclays in January closed much of its precious-metals division, and is reportedly struggling to find a buyer for its UK vault.
 
“[Gold’s] correction, if any, is likely to be a temporary pause,” says French investment and bullion market-making bank Societe Generale’s technical analysis team.
 
While $1190 per ounce “remains a key support medium term…[gold is now] testing short term channel support” from the gentle uptrend of higher highs and higher lows in April, now coming in at $1230 on SocGen’s charts.
 
Silver prices today held steady with gold bullion, trading at $16.90 per ounce, some 4.5% below last week’s sudden 11-month high.
 
Meantime in India – traditionally the world’s No.1 private consumer market for gold – jewelers in Delhi re-started their strike in protest at a new 1% sales tax, with The Hindu newspaper finding “most of the jewellery shops in the capital closed” on Monday despite the fast-approaching Akshaya Tritiya festival and spring wedding season.

Gold Prices 'Correcting', Comex Silver Bets Hit 2nd Largest Ever Ahead of Fed Decision on Dollar Rates

April 25, 2016
Latest News
GOLD PRICES held flat Monday morning against a falling US Dollar, trading up to $1236 per ounce as the US currency retreated from 3-week highs versus the single currency Euro ahead of this coming Wednesday’s April decision on interest rates from the Federal Reserve, writes Steffen Grosshauser at BullionVault.
 
Asian and European stock markets slipped and commodities dropped another 0.5% from last week’s new 2016 highs, as US Treasury bond yields edged back from 1-month highs at 1.89% per annum on 10-year debt.
 
The British Pound meantime hit a 10-week high against the Dollar above $1.45, pushing the gold price in Sterling down to 2-month lows beneath £850 per ounce.
 
Silver prices slipped through and then recovered the $17 per ounce level.
 
“There’s nothing ‘fundamental’ about the metal’s surge from below $15 over the past five weeks,” according to Chinese-owned ICBC Standard Bank’s London HQ in a note.
 
Comex futures and options last week saw bullish speculative bets, net of bearish bets, hit the second-highest level on US regulator the CFTC’s 20-year records.
Chart of Comex silver futures and options net speculative long position
 
“Should [the Fed] continue to hint at further rate delays, we could see the Dollar sell-off resume,” reckons US brokerage INTL FCStone’s analyst Edward Meir, “in which case most commodity markets, including gold, could push higher.
 
“However, gold’s upside will be capped by the fact that funds will be throwing their money at various other markets that are moving up more decisively then gold, while the continued strength in US equities will also act as another drag.”
 
The Bank of Japan is expected to expand market stimulus at its two-day policy review starting this Wednesday, according to a Bloomberg survey of economists.
 
Amid speculation that Tokoy’s central bank could push interest rates for the world’s 3rd largest economy even deeper into negative territory, Japan’s Nikkei stock index ended Monday slightly down after it jumped to an 11-week high last Friday, while the Yen rose again versus all major currencies after its sharpest weekly drop since October 2014.
 
“Gold is in a corrective phase after recent gains,” says investment and bullion bank HSBC’s analyst James Steel.
 
“Each time it has rallied to $1270-$1282, it has fallen back on profit-taking, especially when the Dollar has rallied.”
 
With the Fed meeting likely to spur unease this week, “A further correction is likely,” says Steel, “but the return of India to the global market [after a 1-month strike strike over a new sales tax] and the possibility of firmer oil prices may support prices and keep the market above $1220.”
 
Overnight in Asia, gold trading turnover “was noticeably lighter” despite the $15 price drop from Friday morning, notes Swiss refining and finance group MKS.
 
“Chinese investors remained fairly quiet throughout the day [but with] some modest buying going through.”
 
The new Shanghai Gold Fix – launched as a Yuan-price benchmark last Tuesday – today came in some $3 per ounce above spot-trading London quotes at the 2.15pm auction, equal to $1237.73 per ounce as the Chinese currency edged back to 6-week lows versus the Dollar ahead of this week’s US Fed meeting.

Silver Adds 6.7% for Week But 2016 Gold Price Gains 'Under Threat' Ahead of Fed

April 22, 2016
Latest News
GOLD PRICES held flat in London trade Friday, keeping a 0.9% gain for the week against a rallying US Dollar but staying almost $25 per ounce below yesterday’s sudden spike to 1-months highs at $1270.
 
European stock markets slipped again as Euro gold prices added 1.1% for the week.
 
Commodity prices meantime stalled at Thursday’s near 5-month highs on the Reuters-Jefferies CRB index, holding some 12% higher from February’s 14-year lows.
 
Silver held over $1 higher for the week, setting a benchmark price at midday in London of $17.19 per ounce.
 
The highest LBMA Silver Price since May last year, that marked a 6.7% weekly rise – the second strongest gain of the last 12 months.
 
Chart of spot silver price last 12 months
 
“As demand fears have faded and supply reductions bring key [commodity] markets closer to balance, we believe that the lows of first quarter are likely behind us, particularly in oil,” says US investment bank Goldman Sachs’ natural resources team, switching to “neutral” from “bearish” on the sector.
 
“[But] gold has very limited near-term upside…reflecting a limited ability of the Fed to surprise on the dovish side…and given very high levels of gold net speculative positioning and ETF holdings.”
 
US central bank the Federal Reserve will announce its latest policy decision on Wednesday next week.
 
Current betting in the US futures market today put the odds of any rise from the current 0.5% interest rate at less than 1-in-28.
 
Fixing meantime in Shanghai at a Yuan price of CNY 260.41 per gram on Friday, China’s new gold benchmark ended the week some 80 cents above equivalent international quotes, trading at a mid-price of $1247.40 per ounce as London opened for business.
 
“It will be some time before ‘Shanghai Gold’ can truly challenge the dominance of its international counterparts,” says today’s Shanghai Daily newspaper, republishing a story from state news agency Xinhua.
 
Wholesale trade body the London Bullion Market Association this week told its members that they will be voting at a general meeting on 29 June on changes to its governance structure and remit, possibly to include platinum as well as gold and silver trading.
 
“The LBMA is considering broad changes to the way gold is traded in London,” says Bloomberg, “including transaction reporting and a new trade platform.”
 
“Gold demand has clearly shifted somewhat from East to Eest again,” says German financial services group Commerzbank in a commodities note, commenting on yesterday’s Swiss trade data, which showed the key refining center importing some 50 tonnes of metal last month back from Dubai – more typically a destination for exports.
 
Also looking at Western demand, “The gold rally is most under threat from the resurgence in investor risk appetite,” say analysts at international bank and London bullion clearing member HSBC.
 
“The move in stocks to fresh 2016 highs, if the run continues, may rob gold of some of the oxygen it needs to continue to rally.”
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