Wednesday, April 1, 2015

Gold price falls back into red for 2015

A surge on US stock markets and the dollar coupled with renewed weakness in crude oil saw the gold price begin to lose sight of the psychologically important $1,200 an ounce level on Monday.

Gold for delivery in June – the most active futures contract – fell $18.32 or 1.5% hitting $1,182.38 in heavy midday trade in New York giving up all of last week's gains.

Last week nervous investors piled into gold  after Saudi-Arabia launched airstrikes in Yemen against Iranian-backed militias that had taken over large swathes of the country with the price climbing to a three-week high above $1,220 an ounce.

The rally saw gold recover from its 2015 nadir of $1,148.20 an ounce hit the week before, but the change in sentiment is proving short lived as safe-haven buyers exit the market.

On Monday attention shifted to the looming announcement of a framework agreement between western powers and Iran about its nuclear program, which could reshape the crude market in the Middle-East if and when sanctions are lifted against the world's sixth largest oil producer, just behind Canada. Oil lost more than 1% on Monday, to back below $50 a barrel.

Monday's weakness also wiped out the metal's gains for the year and gold is now trading down more than $120 below its  the 2015 high above $1,300 reached in January.

Gold was also put under pressure by a stronger dollar which gained to within shouting distance of fresh 12-year highs. The dollar was aided by comments from US Federal Reserve Chair Jane Yellen on Friday that a rise in the benchmark rate "may well be warranted later this year."

As it is not income producing gold is negative correlated with interest rates and bond yields. Gold and the dollar also usually move in opposite directions. The US Dollar Index is up 21.6% compared to this time last year and the past year has been the greenback's strongest run on a rolling 12-month period since 1973.

A new report by the World Gold Council that examines the complex relationship between the gold price and the world's reserve currency showed gold prices rise twice as much during weak dollar periods than they fall when the dollar strengthens which helps to explain some of the recent volatility in the price.

Thursday, December 19, 2013

Gold Market Report - Thurs 19 Dec

 

Fed Tapering Whacks Gold, Spooks China, "Normalization" Challenged by US Earnings

WHOLESALE London gold sank against all currencies Thursday morning, falling 1.9% vs. the Dollar to hit 6-month lows after initially trading flat overnight despite the US Fed finally reducing its $85 billion per month in asset purchases.

Cutting next month's quantitative easing of US mortgage and longer-term government bond rates to $75bn, the Fed pointed to "growing underlying strength in the broader economy."

US stockmarket indices the S&P500 and the Dow surged to new all-time closing highs, while Treasury bonds fell and spot gold fell through this week's previous low at $1230.

Besides the taper, however, the Fed revised its policy on short-term interest rates, saying it will hold the federal funds rate at zero "well past the time" that the US jobless rate falls to 6.5%, its previous line in the sand.

Overnight in Asia, Japanese shares rose but Chinese stocks fell as the People's Bank of China broke its own rules and took to Weibo, the equivalent of Twitter, to announce a "short-term liquidity operation" after Shanghai's interbank lending rate jump above 10%.

The PBoC usually waits a month before reporting such moves, says the Financial Times.

"It's very clear they want to calm down market fears," the FT quotes ANZ analyst Zhou Hao, noting the previous spike in Chinese interest rates in June, when US Fed chairman Ben Bernanke spoke about possible QE tapering.

Shanghai gold today fell 0.8% in Yuan but increased its premium over international prices from $6 to $11 per ounce.

Amongst Western investors, "More sensible minds realise," says a note from David Govett at brokers Marex, "that on the whole [the Fed news] is not a good move for the precious complex.

"With further tapering probably to come over the course of next year, the outlook remains muted. However, I don't subscribe to the theory that it's all over for the bullion market [and] would be a buyer of dips if we do manage to break below $1200."

Bids in London's wholesale market briefly dropped below that level Thursday morning, hitting a 6-month low of $1199.75 per ounce.

Priced in Sterling and Euros, wholesale gold bullion fell to its lowest since spring 2010, down 29% and 31% respectively from the start of 2013.

Silver tracked gold in Dollars, briefly falling below $19.30 per ounce – a "key level" according to technical analysts at one bullion bank.

Fed tapering "highlights the overall positive sentiment towards the macro economy," reckons UBS analyst Joni Teves.

"Equities are in fierce competition with gold for investor dollars, and this year's trend of rotation away from gold into growth assets is expected to continue into 2014."

"This is another sign of increasing normalisation for the world economy," agrees Matthew Turner at Macquarie Bank. "Gold's insurance function is less desirable in that environment."

"But if the economy is accelerating as people think," counters Albert Edwards in his latest Global Strategy Weekly for clients of French investment and London bullion bank Societe Generale, "how come Thomson Reuters has just reported the fastest pace of US earnings downgrades on record?

"If we are set for a profits-driven economic slowdown, then the low rate of core inflation will start to become a key concern. Deflationary forces are in fact stronger than even the latest [official data] suggests."

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Monday, March 18, 2013

AngloGold says power cut to cost it 20 000 oz of production

Gold miner AngloGold Ashanti on Monday warned that the fire at a substation in the West Wits region, which cut power to its Tau Tona and Mponeng operations, last week, would result in its first-quarter production being about 20 000 oz lower.

State-owned power utility Eskom reported last Thursday that a fire at a substation had resulted in supply being cut off to the Klerksdorp and Carletonville areas on Wednesday night.

All main power supply to the Tau Tona and Mponeng operations were interrupted between March 13 and 15.

While emergency procedures enabled the safe and prompt evacuation of all underground work areas, continued disruption of power to the mines, owing to the unplanned interruption of the main Eskom electricity supply, halted all but essential water pumping services on the two operations.

“There was insufficient power to run ventilation and cooling plants, hoisting infrastructure or metallurgical plants and other associated production activities,” AngloGold stated.

Eskom had partially restored power until the transformer could be repaired.

Tau Tona resumed underground mining activities on March 15, while the Mponeng operation resumed most of its operations on Monday; however, certain project and hoisting activities did not resume, to enable the gold miner to operate within current electricity supply constraints.

Edited by: Chanel de Bruyn

Gold Market Report 18 March

Gold Jumps Over $1600 as Cyprus Bail-Out Hits Bank Savers, Global Equities Fall

 

WHOLESALE GOLD leapt 1% against the Dollar and 2.3% against the Euro at the start of Asian trade Monday, as global shares sank and major-government bonds rose following the Cyprus bail-out deal announced by European politicians at the weekend.

"[German negotiators] were hand in hand with Finns," says an unnamed official quoted by the Financial Times, "who were much more dogmatic" in forcing a levy worth €7 billion on ordinary bank depositors as part of the €17bn deal.

"Scenes of
Cypriots lining up at cash machines
raised the specter of capital flight elsewhere," says Bloomberg, while Reuters claims that today's Bank Holiday may be followed by a forced shutdown on Tuesday to allow parliament to discuss and vote on the depositor levy, priced at 9.9% of savings accounts over €100,000 and 6.7% below.

"It's as if the Europeans are holding up a neon sign," writes economist Paul Krugman in his New York Times blog, "saying
'Time to stage a run on your banks!'
..."

"[This is] the first example of deposit hair-cuts during the entire Euro crisis," says forex strategist Jens Nordvig at Nomura.

The Cyprus deal "has potential to make depositors in Portugal, Spain and Italy nervous, despite likely assurances from policymakers," he writes.

Weaker Eurozone government bonds fell hard Monday morning, driving Greek interest rates half-a-percentage point higher, while base metals dropped alongside crude oil.

First hitting a 13-session high above $1608 per ounce, Dollar prices to buy gold then slipped back as European stock markets followed Asia in dropping over 1%.

The gold price in Euros jumped 2.3% at the start of Asian trade, hitting 5-week highs above €1240 per ounce as the single currency hit new 3-month lows vs. the Dollar.

Gold priced in Sterling held flat, however, as the British Pound surged nearly 2 cents to $1.51 on the foreign exchange market.

"One of the reasons gold has been coming off," says UBS analyst Tom Price, "is that there has been a view that the risk in Europe was limited and most of their financial market issues were resolved.

"This uncertainty could provide a brand new support for gold for days or even weeks."

Further ahead, "Global liquidity is rising," says London market-maker HSBC, trimming its 2013 average gold forecast from $1730 per ounce to $1700 but noting that "the Bank of Japan has joined the QE party and the Fed shows no let-up.

"Inflation tolerance and currency wars are supportive [of gold]. We expect stronger jewelry and coin demand, lower scrap supply [and] an end to ETF liquidation."

Investors in gold-backed trust funds led by the $63-billion SPDR Gold Shares cut their holdings last week for the 5th week running, reducing overall exchange-traded gold fund holdings to a new 6-month low of around 2,500 tonnes.

On the futures market, however, speculative traders grew their exposure to rising prices as a group in the week-ending last Tuesday. Latest data from US regulator the CFTC says the net long position of bullish minus bearish bets rose 7.4% from early March's 54-month low, the fastest jump since September.

"To sustain gold prices at $2000 by 2016", says analysis from investment bank Merrill Lynch, investors would need to
buy gold in quantities equal only to 2008 – almost 50% below 2011's record 1,700 tonnes – thanks to "steady increases of spending on non-essential items like jewelry in more affluent emerging markets."

 

Adrian Ash

 

(c) BullionVault 2013

 

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.