Gold Price Hits 1-Month High vs Rising Dollar as Yuan, Oil, Stocks & Bond Yields Fall

GOLD PRICES rose to new 1-month highs against a rising US Dollar Wednesday morning in London, touching $1088 per ounce as Western stock markets fell again, crude oil hit fresh 11-year lows, and the Chinese Yuan dropped to its lowest Dollar value since 2010.
After the Thomson/Reuters CRB measure of commodity prices lost 26% in 2015 – its 5th annual decline in a row – the index of 19 natural resources extended its drop for the first 3 days of 2016 to 1.7% as Brent crude fell below $35 per barrel for the first time since 2004.
Ten-year US Treasury yields edged down as bond prices rose, hitting a 3-week low at 2.19%.
New York stock markets pointed to a sharply lower opening as Europe’s major equity indices fell 1.9%.
Gold priced in Euros hit 5-week highs, and priced in British Pounds gold hit its highest levels since October at £740 per ounce.
“Short-term volatility of the Yuan is understandable as ‘hot money’ makes an exit out of China,” says a ‘China Voice’ column from government news agency Xinhua, also citing the US Fed’s interest-rate hike from 0% in December.
“However, there is no risk for the Yuan to see substantial depreciation in the long term.”
China’s Yuan today fell to a new 5-year low on the FX market – beneath where it traded when Beijing first allowed ‘offshore’ Yuan dealing – after the People’s Bank set its onshore exchange rate lower against the Dollar.
“Physical [gold] demand is reasonable across much of Asia,” says a note from investment and bullion bank ICBC Standard Bank, “although the Shanghai arb has narrowed to less than $2.50.”
With China now the world’s No.1 central-bank as well as private gold buyer, that put today’s premium-per-ounce for gold delivered in China compared with London prices back in line with the 12-month average, down from Monday’s near-$6 peak.
“It makes more sense to follow rather than fade this gold rally for now,” ICBC Standard’s analyst Tom Kendall suggests, with US jobs data more likely to disappoint that beat forecasts this week.
“The metal wants to go higher,” agreed Tuesday night’s technical analysis from Scotia Mocatta, the Canadian-owned bullion bank, “but has run into a couple of technical resistance levels.
“Neckline for [an] ‘Inverted Head and Shoulders’ formation comes in at $1081,” says Scotia strategist Russell Browne, targeting a rise to $1115 if that pattern is completed.
“Emergence of a double bottom,” agrees French bank Societe Generale’s technical analysts, “coupled with an Inverted Head and Shoulder at $1045 levels [puts an] additional positive signal on short-term charts.
“These patterns will be confirmed on a break above $1090 with next levels at $1100/1105.”
The gold market “appears to be attempting to base,” says German bank Commerzbank’s technical analyst Karen Jones in a weekly chart book, but “a close above $1089/98 [is] needed to confirm.”
Silver has also seen “a loss of downside pressure,” Jones adds, failing to “confirm” last month’s new 6-year low and now “attempting to stabilise”.
Dollar prices for silver bullion crept back above $14 per ounce on Wednesday in London, pulling the Gold/Silver Ratio of relative prices down below 77.5 ounces of silver equal to one ounce of gold.
Gold/Silver Ratio, daily since 2005
Averaging 54 over the last four-and-a-half decades, the Gold/Silver Ratio hit a 7-year peak in October at 79. It moved below 70 ounces of silver per 1 ounce of gold on only 3 trading days in 2015. 


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.

Contact Us

Adelaide Store

Mezzanine Level
20 King William Street
Adelaide SA 5000
08 8223 2444
9:30am to 4:00pm (Mon. - Fri.)

Brisbane Store

Level 2
17-19 Mt. Gravatt-Capalaba Road
Upper Mt. Gravatt QLD 4122
07 3349 7965
10:00am to 4:00pm (Mon. - Fri.)