GOLD PRICES set new 16-week highs in London trade Wednesday, touching their 200-day moving average – a ‘key’ chart level according to many technical analysts – as weak Chinese inflation data were followed by news of a sharp drop in US retail sales in September.
The Dollar fell near 1-month lows against the Euro on the FX market, but the gold price for German, French and Italian investors still rose towards its strongest levels since mid-July at €1030 per ounce.
Excluding automobiles, US retail sales
fell 0.3% last month from August, while US manufacturing prices fell at their third fastest pace of the last half-decade, down 0.3% when “volatile” fuel and food items are excluded.
Factory prices in the world’s second-largest economy fell in September for the 42nd month in succession.
Recording an afternoon London benchmark price of $1173.90 – some 8.6% above late July’s fresh 5.5-year low of $1080 – gold priced in Dollars touched its average of the last 200 days for the first time since May in spot bullion trading.
Not seen for more than 2 sessions running since February, a rise above the 200-day average held true without pause for five separate year-long stretches during the long bull market in gold prices between 2002 and mid-2008, and was again unbroken between January 2009 and December 2011.
With Dollar prices elsewhere in the world hitting new 3-month highs however at $1175 per ounce in spot trade, Shanghai gold closed Wednesday at a near-zero premium to the global benchmark of London quotes
– sharply below the $2.50 premium averaged over the last 12 months, and deterring new imports after reaching above $8 earlier this week.
Beijing’s new approval for commercial banks to “re-lend” against collateral of existing bank loans does not represent quantitative easing, the People’s Bank’s chief economist said today, calling the market’s reaction to last week’s news a “misreading” and saying that the move “will not have any significant impact on the overall liquidity,” according to Reuters, “and it’s not the Chinese version of QE.”
Gold’s latest Dollar-price gains are “mostly” due to hedge funds buying Comex derivatives contracts, says one bullion bank’s daily note, led by “a mix of algo signals” triggering computerized trading programs plus “supportive signal” from the Euro gaining versus the Dollar and “commodity and macro-fund positioning [both in] options and directional [bets].”
“Gold is so in play,” says one futures broker, noting what he calls “big footprints” in Comex trading volumes.
Gold investment ETF holdings, in contrast, continued to hold flat for the week, and bullion dealers reported only “average” demand from the key Indian consumer market, despite the approach of next month’s festive Diwali buying spree on Hindu calendars.
Silver meantime caught up with gold’s latest rally, finally breaking back above $16 to reach its highest Dollar level since late-June, gaining 14.9% from mid-August’s fresh 6-year low of $14.00 per ounce.