GOLD PRICES gave back an $11 gain overnight in Asia and then fell near 1-week lows at $1246 per ounce in London trade Monday as Western stock markets slipped ahead of a raft of central-bank decisions worldwide including Japan, the US and the UK later this week, writes Steffen Grosshauser at BullionVault.
Gold had touched $1261 in strong Shanghai dealing, but then retreated almost 3% from Friday morning’s new 14-month high of $1282.
Commodities fell hard, knocking almost 4% off crude oil’s 2016 rebound to $40 per barrel.
Silver fell back with gold prices, trading at $15.50 to stand unchanged from last week’s finish.
“In our view, gold’s uptrend remains intact,” said Friday’s closing technical note from Canada-based investment and bullion bank Scotia, “as the metal successfully tested its support at $1246” – a retracement level suggested by Fibonacci analysis.
“Profit-taking could lead to consolidation in the near-term,” Scotia says, “but we continue to believe that gold is gathering momentum before making a run for the $1300s level.”
“Support around $1235 should keep the metal buoyant leading into the FOMC announcement” due Wednesday, says Swiss refining and finance group MKS Pamp in a trading note Monday morning, but it says $1275-1280 “will likely cap any moves higher” this week.
More broadly, “Market sentiment has changed quite a bit” so far in 2016, CNBC was told by Hong Kong-based bullion trader Padraig Seif overnight.
“On the supply side, more and more bullion banks are pulling out of the bullion trade, so on the supply side, you’ve got a decrease and on the demand side you’ve got an increase. It’s quite natural then that the gold price will go up.”
Amongst retail investors meantime, Japan’s largest gold jewelry and bullion outlet reports a strong upturn in demand following the decision to move to negative interest rates.
“Many customers are wagering that it’s better to turn their savings to gold as a safe asset rather than deposit money at banks that offer low interest rates,” said Takahiro Ito, chief manager at Tanaka Kikinzoku Kogyo K.K in Tokyo.
The Bank of Japan’s latest monetary policy announcement is due Thursday, with Tokyo widely expected to stick with the NIRP introduced at the end of January.
The Bank of England also sets its latest policy Thursday, having held rates at a record low of 0.5% for over 7 years.
First comes the US Federal Reserve on Wednesday, with betting in the Fed Funds futures market showing 96% certainty that the central bank will stick with the 0.5% ceiling reached by December’s hike.
“We may well be seeing the first stirrings of an increase in the inflation rate,” said Fed vice-chair Stanley Fischer in a speech last Monday.
China at the weekend reported a string of weaker than expected economic data, with industrial production slowing to 5.4% year-on-year growth – the lowest level since the 2008 financial crisis, according to the National Bureau of Statistics.