GOLD PRICE gains from overnight were swiftly erased near 4-month highs in London trade Thursday, with spot bullion retreating 1.2% inside 15 minutes after the release of stronger US data on inflation and jobs.
Jobless benefits claims fell last week to new 8-year lows. So-called “core” consumer prices rose 1.9% per year in September, but inflation fell back to this spring’s 0% reading when “volatile” fuel and food items are included.
Gold priced in Dollars peaked at $1190 per ounce just as that news was released, more than 10% above late-July’s fresh 5.5-year lows and almost 3% higher for this week alone.
Shanghai gold prices had earlier closed the day higher in Yuan terms, but slipped to a discount to London quotes for the first time in 2 months, ending Thursday some $1.50 per ounce below the global benchmark for bullion settlement.
Gold priced in Euros meantime hit 3-month highs above €1040, and the metal set new 4-month highs against the British Pound and Swiss Franc.
This week’s poor US retail sales data, plus China’s slowdown, “undercut the rationale for a rate rise…and helped propel gold,” reckons a note from bullion bank HSBC’s precious metals analysts.
“But more than that, we continue to sense changing attitudes to gold from investors.”
Wednesday saw the first inflows in two weeks to the giant SPDR Gold Trust (NYSEArca:GLD) – the world’s largest “gold backed” ETF – with a 7.7 tonne addition marking the largest 1-day growth since gold’s sharp New Year rally.
That took the GLD’s total bullion holdings back to 694 tonnes, a new 8-year low when first seen in mid-July.
Advising a 5-10% allocation in gold this week, Paul Singer of $27 billion hedge fund Elliott Management says gold “feels like something institutional investors need to own…[as] the value of paper money is affirmatively aimed at being degraded by central bank policy.
“The supply of gold cannot be radically expanded in a short period of time.”
To boost inflation, “It’s quite obvious that…additional sets of instruments are necessary,” said European Central Bank member Ewald Nowotny – head of Austria’s central bank – in a speech Thursday, because the ECB will “clearly miss” its 2.0% target for consumer-price rises despite this year’s turn to quantitative easing and zero rates.
Any rise in US interest rates, added ECB vice-president Vitor Constancio separately, risks “spillovers [that] might be larger” on the Eurozone of 19 nations “than the domestic effects in the US.
“The global economy has become more vulnerable than ever before…We are still far from having a global lender of last resort adequate for our times.”
Household gold demand in the key Indian market – now in the peak buying season culminating with Diwali next month – has turned higher meantime, according to the Economic Times, with “footfall” to large retailers growing even as prices have rallied during the “auspicious” festival of Navrati on Hindu calendars.
