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Dollar and Gold Prices Down as Trade War 'Worsens' Amid Iran Sanctions, Fed Rates Decision, US Mid-Terms

November 6, 2018

GOLD PRICES slipped Monday lunchtime in London as European stock markets held a small gain, shrugging off another day of equity losses in Asia as a busy week began for trade, sanctions and monetary politics, writes Atsuko Whitehouse at BullionVault.

Even as the US Dollar index retreated from last week’s 17-month high against a basket of other currencies, spot gold prices fell 0.4% from Friday night’s close to trade below $1229 per ounce.

“We are seeing increasing weariness that the US Dollar could run out of steam, which naturally plays into gold,” reckons Stephen Innes, APAC trading head at spread-betting bookmakers Oanda in Singapore.

“If we get a little bit of escalation of US political risk that plays even more favourably into gold.”

Ahead of tomorrow’s key US mid-term elections, political pundit Nate Silver now puts a 1-in-7 shot on the Democrats winning the Senate, with a 1-in-7 shot on the Republicans holding the House of Representatives.

Lambasted by President Trump for raising interest rates, the Federal Reserve then meets to announce its latest policy on Thursday.

Trump’s White House today re-introduced sanctions against No.5 oil exporter Iran over its nuclear research program, but gave some of America’s closest allies exemptions that will allow Tehran’s biggest customers – mostly in Asia – to continue buying its crude for now.

US oil prices fell Monday, down below $63 per barrel.

Hedge funds and other money managers last week increased their bearish position in Comex gold futures and options by 69%, up to the notional equivalent of 141 tonnes – the highest in three weeks – according to US regulator the CFTC.

Chart of 'Managed Money' net long in Comex gold futures and options. Source: BullionVault via CFTC

Holdings in SPDR Gold Trust (NYSEArca: GLD), the world’s largest gold-backed exchange-traded fund, meantime fell 1.8 tonnes on Friday’s small price drop.

Ending the week needing 759 tonnes however to back its shares, the GLD recorded its 4th weekly growth and its 1st calendar month increase since April.

“We expect US-China trade tensions to get worse before they get better,” analysts at US financial giant Citi meantime say in a note after China’s President Xi Jinping hit back President Donald Trump’s “America First” policies, denouncing ‘law of the jungle’ and “beggar-thy-neighbour” trade practices.

The Shanghai Composite stock index declined 0.4% on Monday and Hong Kong lost over 2.0% as Japan’s Nikkei 225 stock index lost 1.6% and South Korea’s export-heavy Kospi index fell 0.91%.

“Equity markets do not seem to be fully incorporating the risks of an escalation of tensions yet,” says Citi, “which could have an effect on investment, sentiment, inflation, and growth.”

Eurozone finance ministers are today set to discuss Italy as the bloc waits for Rome to respond to the unprecedented rebuke it received from Brussels two weeks ago, telling the left-right coalition to revise its 2019 deficit spending plans by 13 November.

“[But] if the recipe works here, it will be said at a European level: ‘We should apply the recipe of Italy to all other countries’,” says anti-establishment deputy prime minister Luigi Di Maio to the Financial Times.

The Euro today slipped 0.2% vs the Dollar, helping keep gold prices for European investors above €1080 per ounce.

On the Brexit front, the London government today dismissed as “speculation” reports in The Sunday Times that an all-UK customs deal to remain within EU rules is being prepared with Brussels as a solution to the Irish border problem.

As Sterling rose Monday, the UK gold price in Pounds per ounce slipped 0.5% to £945.

Gold Prices Retreat After Worst 1st 9 Months for Demand in a Decade

November 3, 2018

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GOLD PRICES dropped $5 per ounce on news of stronger-than-expected US jobs growth on Friday, heading for the first weekly drop in 5 as world stock markets extended their bounce from October’s slump.

Japan’s Topix index closed 3.9% higher from last Friday and Shanghai’s CSI300 added 3.7% after falling Monday back near October’s 28-month low for Chinese equities.

European stock markets then rose for the 5th day running, and Wall Street pointed higher as US non-farm payrolls blew past analyst forecasts, with the Bureau of Labor Statistics estimating jobs growth of 250,000 in October.

Average US earnings growth also rose, accelerating to 3.1% per annum – the fastest pace in 9.5 years.

Chart of gold price (right) vs annual change in average US earnings. Source: St.Louis Fed

Major government bond prices fell Friday, edging interest rates higher, and crude oil fell near $63 per barrel of US benchmark grade WTI, back down to April levels.

With gold prices holding above $1231, silver in contrast rose to $14.81 per ounce, topping its trading range since end-August and rising 3.9% from Wednesday’s low.

After new global gold demand data yesterday said the first 9 months of 2018 were the weakest since at least 2009 – totalling below 3,000 tonnes despite a rise in central-bank buying – “The balance of this quarter may prove a healthy turnaround,” reckons Canadian bank RBC’s analyst Christopher Louney, pointing to October’s 20-tonne rise in gold-backed ETF trust fund investment.

“If physical demand strength can persist in any reasonable amount, Q4 could shape up to be a healthy quarter in line with our price forecasts.”

Over in No.2 consumer nation India however, “Diwali is just a week away but there is no improvement in demand,” Reuters today quotes Mumbai wholesaler Ashok Jain at Chenaji Narsinghji.

“Retail buyers are not interested in making purchases at the current price level” – now near 6-year highs in Rupee terms as demand around the Hindu festival calendar peaks.

A steep rise to 3-week highs in the Yuan versus the Dollar this morning saw Shanghai gold prices close the week at a premium to London quotes of $5 per ounce, one third below the typical incentive for new imports into China and suggesting domestic supplies are sufficient to meet domestic demand in gold’s No.1 consumer market.

Major coin and bar fabricator the Perth Mint in Australia says its global sales of retail gold investment coins and bars fell by two-fifths last month, back in line with the last 3 years’ monthly average of 1.1 tonnes after hitting a 20-month high on September’s price drop.

“Although [India’s] largest gold-buying festival has been weaker than normal,” says analyst Suki Cooper of investment bank Standard Chartered, “e xternal factors remain key and gold investors are likely to focus on macro events [including] the FOMC meeting and the US mid-term elections” coming next week.

“If President Trump loses support and the USD weakens, retail investment demand is likely to pick up, providing a more solid floor for prices, and potentially a tailwind.”

The gold price in Euros also struggled Friday to extend its 6-week rally, trading just shy of last week’s finish at €1080 per ounce as officials from the European Commission got set for a showdown Monday with Rome‘s left-right wing coalition over Italy’s planned 2019 budget deficit.

The UK gold price in British Pounds per ounce meantime fell back below £950, down 1.5% from last Friday’s finish – the highest weekly close for UK investors since mid-June – as UK and European Union negotiators were reported to be preparing a compromise over the post-Brexit border between Northern Ireland the southern Republic.

Gold Prices Rally as Equities Struggle But Weak Dhanteras Demand Follows Q3 ETF Selling

November 2, 2018

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GOLD PRICES rallied back near last week’s closing level for US and Euro investors on Thursday, as major stock markets struggled to extend their 2-day bounce and the UK central bank said business investment is slowing because of Brexit uncertainty.

The MSCI World Index hasn’t risen for 3 days running since mid-September.

With gold rising back to $1230 and €1080 per ounce, crude oil retreated, as did major government bond prices.

That edged 10-year US Treasury yields up to 3.17% – the highest rate in more than 7 years when first seen immediatey after the start of October.

The previous calendar quarter, between July and September 2018, saw global gold demand hold flat from a year earlier said data provided by the mining-backed World Gold Council on Thursday, with outflows from gold ETF trust funds only just outweighed by an uptick in consumer and central-bank demand.

World Gold Council chart of Q3 2018 vs Q3 2017 global demand

The UK gold price in Pounds per ounce rallied £5 on Thursday from an overnight drop to 1-week lows of £946 after the Bank of England kept its key interest rate and QE asset-purchases unchanged yet again.

Forecasting that inflation in the cost of living will stay “above-target for most” of its 2-year outlook, with wage growth now the strongest in a decade, “momentum in household consumption appears greater than previously expected,” said the Bank’s MPC statement.

“[But] business investment has been more subdued…as the effect of Brexit uncertainty has intensified.”

The British Pound had earlier reached 1-week highs versus the Dollar after The Times and Reuters both reported un-named sources as saying the UK is “making progress” towards a post-Brexit deal allowing financial services firm continued access to European Union clients and markets.

The rumors say the UK should expect only “equivalence” however – meaning the EU sets all standards and can reject UK banks or brokerages as it chooses.

Misleading press articles today on #Brexit & financial services. Reminder: EU may grant and withdraw equivalence in some financial services autonomously. As with other 3rd countries, EU ready to have close regulatory dialogue with UK in full respect for autonomy of both parties.

— Michel Barnier (@MichelBarnier) November 1, 2018

Over in India, “gold jewelry demand grew 10% [year-on-year in Q3] as the [summer] price dip attracted bargain hunters,” says the World Gold Council’s new report today.

But gold prices in the Delhi market are now near 6-year highs at 32,650 Rupees per 10 grams, says NDTV.

“[So] even as the festive season is at its peak,” says the Times of India, noting the arrival over the next week of Dhanteras and Diwali on Hindu calendars – by far the heaviest period of demand for the No.2 gold consumer nation – “the demand for gold continues to remain low key.

“More than 50% of gold purchases, even on [Wednesdsay’s] auspicious muhurat of Pushya Nakshatra, were made by exchanging old gold” for re-making into new items, says the paper, rather than creating fresh gold demand.

Zeebiz reports a raft of jeweler discounts and offers, including cheaper re-make charges, for this Dhanteras season.

Hitting new all-time lows on the FX market, India’s Rupee will struggle to rally over the next 12 months thanks to 2019 state elections, plus the country’s heavy trade and government deficits, according to a poll of analysts by Reuters.

Gold Halves Oct' Gains, Silver Price -3% After LBMA 2018 Ends in Boston

November 1, 2018

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GOLD and SILVER PRICES fell sharply on Wednesday, erasing half and all of their earlier October gains respectively as world stock markets rallied and precious-metal executives got back to work from the London Bullion Market Association’s 19th annual conference, held this year in Boston.

The US Dollar today hit mid-August highs against the single currency Euro after new US jobs data said payrolls grew by 227,000 this month on the private-sector ADP estimate, beating Wall Street forecasts with the strongest reading in 8 months.

So-called ‘core’ inflation across the 19-nation currency union meantime edged up to 1.1% per year in October, separate figures said today, the top end of the last 14 months’ range for the Eurozone’s 337 million citizens.

This month’s steep losses in global equities – down 8.2% from end-September for the MSCI index’s worst month since 2012 – mean “There has been a rebound in fear-related demand for gold,” reckons US investment bank Goldman Sachs in a note, “with ETFs beginning to build after several months of declines.”

SPDR Gold Trust (NYSEArca:GLD) – the largest such gold-backed ETF – has expanded 1.7% in size as investor demand has led to the creation of new shares in October.

Gold prices fell to 3-week lows Wednesday however as Western stock markets followed Asia higher after the US stock market managed only its second gain of the last week overnight.

Dropping to $1213 per ounce, gold prices cut their October gains to 1.8% – half the profit seen Friday – with the first monthly rise since March.

Silver prices have meantime rallied and then lost 3.9% in Dollar terms this month after moving down from $15 to $14 per ounce in August and September.

Dropping to $14.22 on Wednesday morning, silver prices headed for a 3.0% loss for October, failing to record a monthly gain since May.

“Investment flows dominate the silver price, not industrial demand,” said David Holmes, senior vice president at global refining group Heraeus in New York, at yesterday’s concluding day of the LBMA 2018 event.

Chart from David Holmes' presentation on silver at LBMA Boston 2018. Source: Heraeus

Calling silver his “favorite metal” – a condition for which World Gold Council strategist John Reade joked “there is medication” – Holmes now expects hedge funds to reduce their record heavy bearish betting against silver, enabling prices to rise to $16 per ounce by this time in 2019.

LBMA delegates were more cautiously bullish, forecasting on average that silver prices will trade at $15 per ounce at the time of next year’s event – set to be held jointly with China’s government-backed Shanghai Gold Exchange in the city of Shenzhen.

According to Tuesday’s conference-app poll, LBMA attendees were more bullish on palladium, forecasting that the tightly-supplied industrial metal will rise 4.7% above last week’s new all-time record highs.

The platinum price outlook is better still, LBMA attendees said in aggregate, forecasting a rise of 20.8% from current levels.

Most dramatic however was the LBMA 2018 Boston conference’s delegate forecast for gold, predicting a gain of more than 25.0% in Tuesday’s poll – the most bullish such forecast since the event began in 2001 – with a price of $1532 per ounce after the more-heavily attended Monday morning poll had forecast an October 2019 gold price of $1565.

Gold Prices Slip as Dollar Hits 17 Month High and Gold ETF Looks to Hold Recent Gains

October 31, 2018

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GOLD PRICES fell on Tuesday morning as the US dollar gained on renewed fears of an intensifying US-China trade war.

Bloomberg reported on Monday that the U.S. is preparing to announce tariffs on all remaining Chinese imports by early December if talks next month between Presidents Donald Trump and Xi Jinping fail to ease the trade war.

Spot gold prices fell 0.7% to $1220.67 per pounce Tuesday lunch time after losing 0.3% on Monday.

Dollar index (DXY), measuring the value of the dollar against a basket of six foreign currencies were up 0.36% to 96.93, highest in more than 17 months.

“There is a little bit of pressure from the dollar for now. But overall gold prices look fundamentally supported. Market sentiment is still very cautious. We feel upside potential for gold at $1,255 is highly possible,” said Benjamin Lu, a commodities analyst with Phillip Futures.

“Gold prices have started to receive some strength, unlike the previous two quarters, from geo-political factors. Dollar potential is still very strong and may limit upside gains for gold prices but it doesn’t look like gold will lose steam due to the dollar vigour just yet.”

Bullion’s recent advance “happened on the back of the market sell-off and spike in volatility,” analysts including Mikhail Sprogis and Jeffrey Currie at Goldman Sachs Group Inc., wrote in a report on Monday. “In our view, it represents a rebound in fear-related demand for gold with ETFs beginning to build after several months of decline.”

Holdings in the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, saw outflows of about 129 tonnes between May and September. So far this month holdings increased by 12.7 tonnes with 5.3 tonnes added on Monday taking the total to 759 tonnes.

It is set to record the first monthly gain since April.

SPDR gold trust holding and gold price chart

“While we think that the U.S. cycle still has room to run it doesn’t mean that markets will not worry about it coming to an end,” Goldman said.

It described bullion’s fundamentals as solid, and kept its three, six and 12-month forecasts at $1,250, $1,300 and $1,350 respectively, but sees upside risks once U.S. growth begins to slow.

European stocks opened higher after Wall Street was hit late on Monday, and Chinese equities opened lower on Tuesday, with the possibility of more U.S.-China tariffs and a drop in tech stocks.

The sentiment was then helped after Mr Trump told Fox News that “I think we will make a great deal with China, and it has to be great because they’ve drained our country.”

Chinese stocks were also helped by the country’s securities regulator which said it would encourage share buybacks and investment from insurance companies, in the latest statement from officials.

China’s CSI 300 index of major Shanghai and Shenzhen stocks was up 1.7% while China’s renminbi slipped to a fresh 10-year low against the dollar. South Korea’s Kospi Composite gained 1% and Japan’s Nikkei 225 Index was up 1.45%.

Early afternoon on Tuesday European stocks fluctuated with underwhelming European economic data. FTSE 100 was up 0.14 %, Dax declined 0.36% and CAC lost 0.28%.

The London Bullion Market Association (LBMA) will begin publishing data on 20 November that will provide the most accurate picture yet of the size of London’s gold market, its chief executive said on Monday.

London Bullion Market Association’s 2018 conference ends today in Boston, Massachusetts. Next year’s event will be held in Shenzhen.

Gold Prices Edge Lower as Dollar Firms and European Stocks Rebound after Italy Avoids S&P Rating Cut

October 30, 2018

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GOLD PRICES slipped Monday morning from the previous weeks three-month high as the dollar firmed and European Stocks gained amid mixed Asian markets after the setbacks of last week, writes Atsuko Whitehouse at BullionVault.

Spot gold prices were edging lower at $1,230.53 per ounce Monday lunch time. On Friday, they touched their highest level since 17 July at $1,243.29.

Gold prices have gained more than 6% after hitting $1,160.73 per ounce mid-August, the lowest since January 2017.

“With the extreme slide in stocks, gold became a temporary safe haven but event driven rallies don’t last long and the metal pared gains as stocks gave up some losses,” said George Gero, managing director at RBC Wealth Management.

“Bonds have also become a safe haven with stocks getting sold-off. The dollar is still pretty high, which is a headwind for gold as it makes the metal expensive in major consumers like India,” Gero said.

Dollar index, against a basket of foreign currencies, gained 0.2% to 96.56. The index has advanced to 1.4% this month.

Hedge funds and money managers cut their net short position in Comex gold futures and options by 28% to the notional equivalent of 83 tonnes, the smallest net short position since mid-July, in the week to 23 October, according to US regulator the CFTC.

Chart of Managed Money net speculative position in Comex gold futures and options, tonnes equivalent. Source: BullionVault via CFTC

Stocks in Europe were higher on Monday morning. FTSE 100 was up 1.50%, DAX gained 1.90% and CAC edged higher by 0.26%.

In Asia, Japan’s Nikkei slipped 0.16%, having climbed 1 percent earlier while South Korea’s KOSPI stumbled 1.53%. Shanghai composite slipped 2.18%.

Italian bond yields fell sharply on Monday, with 10-year borrowing costs hitting a one-week low following the decision by ratings agency Standard & Poor’s to leave Italy’s sovereign rating unchanged, but lowered the ratings outlook to negative from stable.

That fall narrowed the gap over German bond yields to 296 basis points from 306 basis points late Friday.

German Chancellor Angela Merkel will not seek re-election as the leader of the Christian Democratic Party (CDU). Merkel also stated that she will be stepping down as Chancellor in 2021. “I will not be seeking any political posts after my term ends,” Chancellor Merkel told a news conference in Berlin Her decision comes after the CDU suffered heavy losses in the regional election in the state of Hesse that has threatened the stability of the governing coalition.

Market reaction was muted so far with the Euro remaining above last week’s low against the dollar on the news.

Gold prices for European investors are flat at €1,082.16 per ounce.

Far-right politician Jair Bolsonaro has won a sweeping victory in Brazil’s presidential election on Sunday.

Brazil, the biggest economy in South America and the world’s eighth largest economy by nominal GDP, has been struggling to emerge from its worst recession in history.

This week markets will focus on US jobs data and earnings which include big tech names such as Apple and Facebook.

Monetary policy decisions are due in Japan and the UK this Thursday.

Britain’s budget announcement is scheduled this Monday afternoon.

Prime Minister Theresa May’s spokesman stated this Monday morning that all spending commitments Chancellor Philip Hammond will set out in the budget are funded irrespective of a Brexit deal and if the economic circumstances change then economic interventions will be considered.

The gold prices for UK investors slipped down to £959.88 per ounce after reaching £969.94, the highest for more than 4 month last Friday.

Gold Trading Capped by Fed's 'Insistent' Dollar as China Stimulus Bucks Global Stock Sell-Off

October 26, 2018

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GOLD TRADING in London saw a rising US Dollar curb wholesale bullion prices below $1240 per ounce yet again Friday morning, but the metal added $10 for the week as Asian and European stock markets ignored yesterday’s steep rally on Wall Street to drop for the 13th time in 19 sessions this month.

Shares in US tech giants Amazon (Nasdaq: AMZN) and Alphabet (Nasdaq: GOOGL) both fell over 4% in after-hours trading last night after missing analyst forecasts for their latest earnings reports.

Slow gold trading in Asia today “[was] just a temporary lull in a more structural move higher in the coming days,” reckons Australasian bank ANZ’s analyst Daniel Hynes.

With US third quarter GDP data due out later on Friday, “Investors will keep a watch on New York trading” the Japan Times quotes one Tokyo analyst.

“Investors [have] continued to reduce stock market exposure on worries over fundamentals,” says another.

“For those eager for signs that this is not the end [of the 10-year rise in world stock markets], one need look at the performance of high-yield bonds,” says a column at Barron’s.

“Usually, junk bonds move in sync with small-cap stocks,” but corporate debt rated below investment grade has lost only 1.2% so far this month versus a 9.1% drop in the S&P500 stock index.

“A junk-bond implosion might not be imminent,” agrees a column at Bloomberg.

“But if risk-off sentiment intensifies, the worst stocks and the worst bonds will be one and the same.”

The rising US Dollar today saw gold priced in British Pounds trade up to £965, erasing the last of 2018’s previous £67 drop as wrangling continued between London and the European Union over finalizing a deal for Brexit next March or risking “no deal chaos“.

Chart of UK gold price in Pounds per ounce. Source: BullionVault

Euro gold prices also rose to their highest since June on Friday, extending the week’s 2.1% gain to come within 40 cents of €1090 per ounce despite stronger-than-expected consumer sentiment surveys from both France and Germany.

Most Eurozone government bond prices rose as stocks fell, but Italy’s cost of borrowing rose above 3.5% on 10-year debt, widening the spread over German Bund yields to 316 basis points.

Crude oil meantime erased yesterday’s rally, trading back down to $76 per barrel of Brent, as Turkey’s President Erdogan said he has more “information and evidence” about oil giant Saudi Arabia’s murder of US-based journalist Jamal Khassoghi in Istanbul.

Ahead of the US GDP data, the Federal Reserve has been “very insistent” about planning to keep raising Dollar interest rates, said Mohamed El-Erian – chief economic advisor at insurance giant Allianz – to CNBC this morning, failing to offer investors “a single soothing word” during this month’s stockmarket plunge.

With Shanghai’s stockmarket managing a small gain this week after Beijing launched a raft of support and stimulus, “We don’t need to worry too much” about China’s weak Q3 growth – the slowest since the global recession of 2009 – reckons Hu Yuexiao, chief analyst at Shanghai Securities.

“[Chinese] investment has stabilized and started to rebound, and the weakening of growth may have possibly stopped.”

Gold Bullion in Euros Rises Fastest Since UK's Brexit Vote as ECB Confirms 'Operation Twist'

October 25, 2018

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GOLD BULLION set or held near new multi-month highs against all major currencies in London trade Thursday, again nearing $1240 for US investors as the Dollar slipped amid fresh volatility in world stock markets.

Asian equities fell hard once again overnight, pulling Tokyo down to 13-month lows, but Shanghai held steady after New York’s S&P500 index erased the last of 2018’s prior 9.4% gains at Wednesday’s close.

Early gains in European stock markets were then cut as the European Central Bank said it “anticipates” ending all new QE bond purchases in December as planned.

Priced in the Euro currency, gold bullion today touched €1085 per ounce, its highest since end-June, with a rise of 7.2% from late-September’s 32-month low.

That’s the fastest 4-week rise in Euro gold prices since the UK’s shock Brexit referendum result of mid-2016.

Chart of gold priced in Euros, last 5 years. Source: BullionVault

“Volatility in the US equity market, in particular the 6% drop in the S&P500 over the last 3 weeks, has helped support gold as a portfolio diversifier,” says the latest weekly analysis from strategist Jonathan Butler at Japanese conglomerate Mitsubishi, also noting “evidence of significant short covering and new longs in the speculative bullion futures market.

“Trade tensions between the US and China have also played a part in supporting gold [by risking] global growth.

“Risk hedging in gold also has a geopolitical dimension as global tensions [rise] over the killing of a Saudi journalist. “

US intelligence chief Gina Haspel, director of the CIA, yesterday listened to an audio tape – called “compelling” by Turkish sources – of Jamal Khashoggi’s interrogation and murder while visiting Istanbul, the Washington Post reports.

Saudi Arabia’s own attorney-general today said information received from Turkey “indicates that the suspects in the incident had committed their act with a premeditated intention.”

The world’s No.5 gold consumer nation, Turkey on Thursday left interest rates unchanged at the sudden 15-year high of 24% set in September.

Ankara meantime said “the process has begun” to buy and deploy Russian-made S-400 missiles by this time in 2019, raising tensions with the United States after Turkey took offense at the way Washington offered its Nato ally only an ‘off the shelf’ system for air-defense in 2015.

Back in Frankfurt on Thursday, the ECB confirmed it will maintain its stockpile of QE-bought assets in 2019 by re-investing all the money it receives from maturing bonds.

A policy known as Operation Twist, and “frankly [something] we haven’t even discussed when we are going to discuss it” according to ECB chief Mario Draghi only last month – that will see the 19-nation central bank buy around €200bn worth of bonds over the first 9 months of next year, says the Financial Times.

“The ECB’s authoritative leaks on Operation Twist say it wants to prevent the end of QE from turning into a new debt crisis for the weakest countries,” says Italy’s Il Sole 24 Ore newspaper.

Italy’s debt prices rallied on Thursday, edging down its cost of borrowing from this week’s 4-year highs and helping shares in Milan’s banking sector recover, after senior figures in Rome’s left-right coalition government sought to reassure investors over its 2019 budget plans.

Italy’s financial problems “[have] added to the greenback’s relative strength,” says Butler at Mitsubishi, “which would normally be negative for USD-denominated precious metals.

“However in this environment of risk aversion, bullion can rally despite a strong Dollar.”

Gold Price -$10 from 3-Month High as Trump Slates 'High-Rates Powell' at the Fed

October 24, 2018

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GOLD PRICES dipped below $1230 per ounce Wednesday in London, retreating over $10 per ounce from yesterday’s new 3-month highs as European stock markets rallied but Wall Street futures pointed lower yet again.

With the S&P500 now down more than 7% from mid-September’s record peak, “To me the Fed is the biggest risk, because I think interest rates are being raised too quickly,” said US President Donald Trump to the Wall Street Journal in an interview published last night.

Adding that the US central bank should be independent “in theory”, Trump said “I have a hot economy going.

“[But] every time we do something great, [Fed chair Jerome Powell] raises the interest rates…[He] almost looks like he’s happy raising interest rates.

“Obama – remember this, it’s very important – Obama had zero interest.”

Asked if he regretted nominating Powell for the job – starting this February and running until at least 2022 – “Too early to say, but maybe,” said Trump.

“He was supposed to be a low-interest-rate guy. It’s turned out that he’s not.”

Chart of Fed Funds rate vs. gold price. Source: St.Louis Fed

Crude oil meantime extended Tuesday’s 4% drop to 7-week lows today after Saudi Arabia – widely condemned for “the worst cover-up ever” over the torture and murder of a US-based journalist at its consulate in Istanbul – promised to play a “constructive and responsible role” in stabilizing prices by increasing its output.

Washington’s impending sanctions against No.5 oil producer Iran are “unilateral” says Turkish foreign minister Mevlut Çavuşoğlu, telling the White House it “[must] consult especially with the countries of the region” before extending sanctions to states which continue to trade with Tehran after next week’s 1 November deadline.

UK broadcaster Sky News last night said the body of murdered US-based journalist Jamal Khassoghi has been found “cut up” and “disfigured” in Istanbul, citing un-named sources.

The BBC meantime published a detailed investigation into China’s “massive, highly secure…re-education camps” in the Western region of Xinjiang, where guards are armed with “tear gas, Tasers, stun guns and spiked clubs” may be holding 1 million Muslim Uighurs without trial.

Shanghai’s benchmark gold fixing today hit ¥276 per gram, the highest price since 25 January and 5.7% above mid-August’s 20-month low.

“The SGE premium for onshore traders [versus London quotes] opened around $7.00-8.00,” says the trading desk at Swiss refining and finance group MKS Pamp, “which was quite healthy and prompted some demand from Chinese banks and investors.”

Euro gold prices meantime held near €1080 per ounce – up 6.4% from this time last month, when the metal fell to its lowest level in the single currency since January 2016 – as Italy’s deputy prime minister Matteo Salvini rejected the European Commission’s rejection of Rome’s 2019 budget plans, the first-ever such rebuke from Brussels for a member state’s national government.

“Italians come first…Italy no longer wants to be a servant to silly rules,” said Salvini, right-wing Lega Party partner with the left-wing M5s Party in Rome’s ruling coalition.

The UK gold price in Pounds per ounce held at £950, up 5.8% inside 3 weeks, as Prime Minister Theresa May told lawmakers that a Brexit deal with the European Union is now 95% complete, urging rebel MPs in her Conservative Party to back her in “the very last stages of the talks”.

Gold Price Hits Mid-July Highs as China Stimulus 'Fades Fast' and 'Spreadonomics' Hit Italy

October 23, 2018

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GOLD PRICES jumped to their highest Dollar price since mid-July in London trade on Tuesday, hitting $1236 per ounce as world stock markets fell after China’s main index erased most of yesterday’s stimulus-fueled rally.

Gold prices came within 40 cents of $1240 per ounce – adding 6.8% from August’s plunge to start-2017 levels – as geopolitical tensions rose with Turkey’s President Erdogan detailing to the Parliament what Ankara’s intelligence services claim is the “naked truth” about the Saudi murder in Istanbul of US-based journalist Jamal Khashoggi.

Yet again silver failed to follow gold higher, trading up to only 1-week highs at $14.80 per ounce as crude oil hit 1-month lows and other industrial commodities fell.

Shanghai’s CSI 300 index lost 2.7% and the Yuan dropped to new 21-month lows versus the Dollar even as Beijing followed the weekend’s raft of supportive measures and promises with new support for private debt and another $17 billion “liquidity injection” of short-term loans to commercial lenders.

“Nobody expected the policy effect to fade out so soon,” the South China Morning Post quotes one Hong Kong analyst.

“The last two weeks of steep correction indicate that the A-share market is in panic mode,” says brokerage CLSA in a note on China’s domestic Yuan-denominated equities.

The price of wholesale gold bullion bars rose faster still on Tuesday for non-US investors, gaining 1.3% for the week so far in Euro and Sterling terms as the EuroStoxx 600 index fell 1.1% and London’s FTSE-100 fell below the 7,000 mark – a new record high when first reached this March.

Wall Street futures put the S&P500 on track to open lower yet again, heading for its 14th loss in 17 sessions so far this October.

Alongside gold prices, developed-world government bond prices also rose, cutting the cost of borrowing for Western governments. But Asia, Africa, East Europe and Latin America bond prices fell, adding extra stress to emerging-market borrowers.

The flight into Treasuries drove the 10-year US bond yield down another 5 basis points to 3.15%, almost one-tenth of a percentage point below this month’s new 7-year highs.

Chart of US 10-year T-bond yields vs gold price. Source: St.Louis Fed

Italy’s bond yields also eased back on Tuesday but not as fast as other Eurozone markets after Rome’s Council of Ministers approved the left-right coalition government’s 2019 budget plans, including the “Quota 100” early retirement scheme, requiring 38 years of state-pension contributions.

Life expectancy in Italy currently stands above 83 years old, and is forecast to keep rising.

Rome’s spread over German Bund yields today rose back above 300 basis points – the 5-year high reached last month – and the spread over Spain’s borrowing costs rose back near this month’s 20-year high.

“The ‘spreadonomics’ is unforgiving,” says Italian financial newspaper Il Sole 24 Ore, “and governments cannot free themselves from the judgment of investors.”

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