GOLD PRICES slipped 0.5% from last week’s finish as New York traders prepared to return from the long Martin Luther King weekend Tuesday, slipping to $1084 per ounce as world stock markets rose – and crude oil bounced 5% from new 12-year lows – despite the weakest official GDP data from China in a quarter-century.
Local officials last week “admitted” to faking prior data, Communist Party newspaper the China Daily reported, blaming the current downturn on a shift to more accurate figures.
Annualized GDP growth in the fourth quarter fell to 6.9% on Tuesday’s data, with December’s year-on-year growth in retail sales, industrial production and urban investment all missing analyst forecasts as well.
“With three full weeks until the Chinese New Year, a key buying time for precious metal jewellery and investment products, demand ought to continue to be strong,” says Japanese conglomerate Mitsubishi’s analyst Jonathan Butler, looking at consumer offtake of platinum – rallying Tuesday from a new record-wide to discount to gold prices after touching fresh 6-year lows at $817 per ounce yesterday.
“After that, without the cushion of seasonal Chinese demand, platinum could be lacking yet another element of support,” says Butler, adding that with commodity and financial markets falling so badly so far in 2016, “it might reasonably be asked why gold has not done better than the 2.5% appreciation in Dollar terms that it has achieved.”
“Possible reasons include turnover on the Shanghai Gold Exchange,” Mitsubishi’s weekly report says, pointing to the 5% year-on-year drop in trading volumes for high-grade kilobars during 2016 to date – “continuing the trend seen in the last quarter of 2015 and perhaps suggesting an underlying malaise given the country’s economic slowdown and equity market turmoil.”
Trading volume in Shanghai’s main wholesale gold contract today fell to a new 2016 low, equal to 16.3 tonnes at the closing price as gold slipped 0.5% versus the Yuan.
Compared to US Dollar quotes for gold in London’s bullion market – historic centre of the world’s wholesale trade – Shanghai’s main contract slipped to a premium of barely 30 cents per ounce, the worst incentive for new imports since October’s negative levels.
“The key theme for 2016,” said US investment bank Goldman Sachs’ global head of commodities research Jeffrey Currie in a note Friday, forecasting an upturn later this year, “will be real fundamental adjustments that can rebalance [natural resources] markets to create the birth of a new bull market.”
But “we remain in the wrong type of global economy for commodity prices to perform well,” counters bank Macquarie, saying that crude oil supplies worldwide must wait until 2017 “[for] the first year in five that results in an annualised inventory draw[down]”.
Crude oil today rallied 5% from Monday’s new 12-year lows beneath $28 per barrel, while West European stock markets followed Asia sharply higher, rising over 2%.
The Euro retreated slightly against the Dollar on the FX market, buoying the price of gold bullion for investors across the 19-nation currency union level with last week’s close at €998 per ounce.
Gold priced in Sterling also held firm above £760 per ounce as the Pound slipped following a speech from Bank of England governor Mark Carney noting that global economic weakness, and slow inflation, look likely to delay any UK interest rate rise.
UK inflation last month accelerated to its fastest pace since October 2014 when fuel and food are excluded, the official UK data agency said Tuesday, rising to 1.4% per year against the 2.0% targeting by the Bank.
