GOLD PRICES held unchanged from last week’s close in London trade Tuesday, returning from the May Bank Holiday at $1295 per ounce as world stock markets fell with a weakening US Dollar.
European stock markets returned from May Day to drop 1.5%, while commodity prices extended yesterday’s 1% fall.
Tokyo’s Nikkei index yesterday sank over 3% to start Japan’s Golden Week holidays more than 15% down for 2016 to date.
The Yen then rose overnight to its highest level against the US Dollar since September 2014, as the Reserve Bank of Australia cut its key interest rate to a new record low of 1.75%, with governor Glenn Stevens saying “Inflationary pressures are lower than expected.”
That drove gold priced in the Australian Dollar 2.1% higher inside 30 minutes, back near February’s 4.5-year highs.
“Gold rallied to a high of $1303 [on Monday] but was unable to break resistance at $1306.50,” says a technical analysis from Canada-based Scotiabank’s New York office, pointing to gold’s January 2015 high.
“Profit-taking emerged…[and] resistance remains at the 15-month high.”
The world’s largest gold-backed trust fund, however, yesterday expanded at the fastest 1-day pace since gold prices shot towards their all-time peak in August 2011.
The SPDR Gold Trust (NYSEArca:GLD) added almost 21 tonnes to the metal backing its shares Monday, reach 825 tonnes, the ETF’s largest size since mid-December 2013.
When the price of gold first pushed up through $1300 per ounce in September 2010, the GLD ETF held 60% more gold than today.
Monday’s economic data said US manufacturing activity retreated near the slowest since 2009 in April, while the Eurozone expanded faster than analysts forecast on the Markit PMI survey.
Chinese data this morning then reported the 13th consecutive month of shrinking manufacturing activity on the Caixin PMI survey.
“Total new orders stagnated and new export work fell for the fifth month in a row,” says a China manufacturing note from Markit.
The Shanghai Gold Price benchmark – launched on 19 April – today showed a discount to world spot prices for the second session running, returning from the Labor Day holiday to lag the 1.4% rise in US Dollar prices and settle $1 per ounce below comparable London quotes even as the Yuan edged higher on the FX market.
The US Treasury on Friday named Japan, China and Germany as “potential currency manipulators” reports the Financial Times, tracking their exchange rate versus the Dollar and threatening “remedial action” if diplomacy fails to reverse policies accused of unfairly devaluing their currencies to boost exports.
US Treasury Secretary Jacob Lew reportedly “warned Japan and the Eurozone at the G20 in Shanghai in February that the Obama administration is losing patience with use of beggar-thy-neighbour tactics,” said the UK’s Daily Telegraph last week.
“Germany in particular is coming into the US cross-hairs…[while Japan’s] Abenomics [is] ‘dead in the water’,” according to Japanese bank Nomura’s strategist Richard Koo.
Following gold prices lower, silver meantime “appears to have found strong resistance at the $18 level,” says Scotia, after it also retreated from Monday’s pop to the highest price since mid-January 2015 at $18.01 per ounce.
Revisiting yesterday’s lows at $17.48 in London on Tuesday, silver prices traded 3% below Monday’s peak.
The iShares Silver Trust (NYSEArca:SLV) also expanded sharply on Monday, taking an extra 56 tonnes to back the number of ETF shares in issue and reaching its largest level since December 2014 at 10,538 tonnes.
