GOLD BULLION dropped sharply to 3-week lows on Wednesday as new data put US job openings at 5.8 million for the end of July – the largest number of would-be hirings since the JOLTS series began in 2002.
US stock markets erased an opening 1% gain as US Treasury bond prices fell to 1-month lows ahead of next week’s Federal Reserve decision on interest rates.
Silver prices held firmer than gold bullion once again after twice spiking near $15 per ounce overnight.
Dropping $10 per ounce towards the 3pm LBMA Gold Price auction in London, bullion then recorded its lowest daily benchmark since 11 August, just below $1110 per ounce.
“While the ‘teens’ seem[ed] to be the big support,” said a technical analysis of the gold price from Canadian-owned market maker Scotia Mocatta overnight, “the lower highs [had] lessened our once very bullish enthusiasm.”
“Price action has eroded the more confident picture of last week,” agreed an Asian trading note from Japan’s Mitsui Global Precious Metals.
“With the next [US Fed] meeting a week away, uncertainty will play on the market. Downside targets cluster around $1107 and extend to $1093.”
But “whatever the Fed move,” says another bullion market-maker’s dealing desk, “I think it will be beneficial to gold.
“Another round of easy money and gold shall take off (being over-sold)…a round of [interest-rate] tightening and gold shall take off (equities tumbling, [emerging-market] strains)…a ‘minimalistic’ round of tightening and gold shall take off (a mixture of previous reasons)!”
Silver today spiked twice to $14.95 per ounce – the sudden 1-week high reached and immediately lost last Wednesday – in Far Eastern trade, while Japan’s stockmarket led a surge in Asian equities overnight with a 7.7% gain.
Copper edged higher by late afternoon in London, but other commodities dropped for the first session in three, knocking 1.5% off Brent crude oil’s Dollar price.
One week before the US Fed’s long-awaited September decision on raising Dollar rates from zero, the Bank of Canada meantime held its key interest rate unchanged at 0.50% today.
Futures market prices cut the odds of the BoC reducing rates in October to just 1-in-6, with the likelihood of a cut before October 2016 now below 50%.
Over in India, the government approved details of the much-discussed Gold Monetisation scheme, aimed at mobilizing some of the world’s No.2 gold-buying nation’s private stockpiles to meet future demand and ease the country’s Current Account Deficit.
Crucially, however, the “the rate of interest to be paid has yet to be determined,” notes Tom Kendall, precious metals strategist at Chinese-owned investment and bullion bank ICBC Standard Bank.
Encouraging households to put gold on deposit in these new savings schemes, “[India’s] banks will need to cover the costs of gold assays, vaulting and transaction costs, which will impact the rates they are able to offer,” Kendall points out.
“Those are likely to be a long way below Rupee cash interest rates” – currently at 4% with 8% paid on 1-year fixed deposits.
