GOLD PRICES touched 1-week highs of $1145 per ounce Tuesday as world stock markets fell sharply again and New York’s Dow Jones index dropped almost 400 points at the open.
Gaining1.0% from last weekend, wholesale gold bullion for London delivery found a clearing price on solid volume of $1141.90 per ounce at Tuesday morning’s LBMA Gold Price auction.
That was a five-year low when first reached in mid-July.
China’s stock market meantime closed Tuesday 1.6% lower after new data showed manufacturing activity in the world’s second largest economy shrinking at the fastest pace since 2012.
Western equities fell harder, dragging Eurozone markets well over 2% down as crude oil slumped more than 4%, and major government bond prices rose, pushing market interest rates down.
Shares in global hedge-fund managers Man Group (LON:EMG) dropped 5.8% – more than twice the London FTSE’s broader drop – amid reports that its Chinese division’s chairwoman, Yi Lifei, has been detained by Chinese police investigating insider trading and “false information” causing “panic and disorder” during last week’s dramatic drop in Shanghai’s stock market.
After cutting interest rates and pumping $200 billion into the stock market since it began crashing 40% from June’s 7-year peak, Beijing today urging listed companies to issue cash dividends, go on a mergers & acquisition spree, and buy back their own shares in a bid “to push forward reforms of State-owned enterprises and promote the steady and healthy development of the capital market,” according to official newspaper China Daily.
Shanghai gold premiums, over and above comparable London quotes, eased back on quieter volumes, but held near $3 per ounce after turning negative amid last week’s ‘Black Monday’ equity turmoil for the first time since early July.
“Only a definite move above $1163/1173 will mean further recovery,” says Stephanie Aymes, head of technical analysis at French investment bank and bullion market-maker Societe Generale, pointing to the gold price’s “multi-month descending trend.”
“Our view,” says Tom Kendall at Chinese-owned ICBC Standard Bank in London, “remains that…another test of the resistance area around $1162/65 is likely.
“The prospects of a September US rate rise are close to zero, and…[bearish traders] continue to cover in the run up to the FOMC meeting.”
Latest data from US regulators the CFTC show hedge fund and other speculative traders retreating for the fifth week running from end-July’s record large bearish betting against gold prices.
The single Euro currency ticked higher against the Dollar on Tuesday, but held almost 5 cents below last week’s sudden 2015 high above $1.17 – a peak swiftly lost as US Fed policymakers told the annual Jackson Hole central bankers’ conference that they intend to push ahead with raising interest rates from zero despite the stockmarket turmoil.
The Fed’s first rate rise since 2006 “is now looking more likely in December than September,” Bloomberg quotes economist Vyanne Lai at National Australia Bank Ltd. in Melbourne today.
“[So] gold prices may follow a gentler declining trend than previously expected, but the market remains entrenched in a bearish cycle.”
But “given the mounting problems” in equity markets, counters Singapore brokerage Phillip Futures, “it is unlikely that gold may dip drastically in the near term.
“The momentum right now is for gold to rally more than to fall.”
