Gold Bullion Leaves GLD Again But 'Likely to Test' 2011 Downtrend as Dollar Falls

GOLD BULLION fell against all major currencies bar the US Dollar in London on Tuesday, losing 1% from yesterday’s 3-week high in Euro terms as Western stock markets rose with major government bond yields.
Ten-year US Treasury yields touched 1-week highs at 2.29% as bond prices fell ahead of tomorrow’s US Federal Reserve decision on monetary policy – widely expected to leave rates and QE holdings unchanged.
Despite yesterday’s rise to 1-month US Dollar highs in the gold price, Monday’s close saw another outflow of gold from the bullion backing the SPDR Gold Trust (NYSEArca:GLD), as shareholders again liquidated stock from the largest exchange-traded vehicle for tracking the metal.
The world’s largest ETF of any kind at its peak 2011 value, the GLD has not had a day of bullion inflows in almost 1 month, shrinking by 6.6% since 26 June as gold prices first lost and then regained 4.0% against the Dollar to trade back at $1255 per ounce on Monday.
Technical analysis says “Gold [is] looking to break out of downtrend since 2011 nominal high,” writes Mitsubishi’s strategist Jonathan Butler in his latest quarterly report for clients of the Japanese conglomerate.
“Gold has already tested the red downtrend line that has prevailed since the 2011 nominal high and is likely to test it again soon.”
Chart of gold's 2011-2017 downtrend. Source: Mitsubishi from Bloomberg
Looking at investment demand, “Rising US real [bond] yields may temper gold’s upside in Q3,” says Butler, but “the Dollar will remain on the back foot if US political deadlock continues…which will help support USD denominated gold.
“Elevated risks of an equity pullback could help gold as a haven,” Butler goes on, but from the key Asian consumer markets “physical demand for gold has been mixed so far this year.”
China’s first-half gold consumption data are due shortly from the government-mandated China Gold Association.
Legal gold imports to No.2 consumer India “more than doubled” by value in the April-to-June quarter from a year earlier, LiveMint reports, reaching $11.3bn.
Former No.4 consumer nation Turkey – pushed into 5th place by Germany behind the US since 2015 – meantime saw its trade deficit yawn 43% wider in May from 12 months earlier, “mainly due to a strong 237% y/y growth rate in imports of gold and other precious metals to $2.23bn,” says Intellinews, summarizing TUIK figures.
“The second half is likely to be stronger in India during the post-monsoon wedding season,” says Butler at Mitsubishi, now expecting gold to average $1250 per ounce in 2017 and $1300 in 2018.
Year-to-date, gold has averaged $1236 per ounce, rising from a New Year low of $1151 to a June peak at $1293.50 on the daily LBMA Gold Price benchmark.
The London Metal Exchange (LME) today told Reuters that it will challenge the LBMA benchmark’s global dominance by publishing gold and silver reference prices – also taken at 10.30am and 3pm in London for gold, and 12 noon for silver – based on trading of its new futures contracts.
The move “follow[s] a number of requests from key precious metals market participants,” the LME claims.
The LME’s spot gold contracts have gained 3.3% in Dollar terms since launching a fortnight ago yesterday, rising on 7 of those 10 trading days.
Data show the 12-month contract on LMEprecious rising from a contango above spot of $18.00 per ounce to $18.80 over that time.
Comex gold contracts – the world’s most heavily traded futures referencing gold bullion – have in contrast gone from a $21 one-year contango to $20.20 over that time.


This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. This report was produced in conjunction with ABC Bullion NSW.

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