London Gold Market Report
from Adrian Ash
BullionVault
Fri 6 Sept 09:55 EST
The PRICE of gold jumped $33 from a new 10-session low in just 5 minutes on Friday, touching $1393 per ounce before easing back after August’s Non-Farm Payrolls data on US jobs came in weaker than expected.
Net hiring rose to 169,000 jobs instead of the 180,000 analysts forecast. The US unemployment rate, however, fell to a 44-month low of 7.3%.
The US Federal Reserve has set a 7.0% target as a precondition for any discussion of raising Dollar interest rates from zero. Today’s data had been widely expected to decide this month’s vote on perhaps “tapering” the Fed’s $85 billion in monthly bond-buying stimulus.
“To start the wind-down [of QE stimulus] it will be best to have confidence that…factors that we think have held down inflation really do turn out to be transitory,” said Chicago Fed president – and core supporter of the Fed’s $85 billion in monthly bond purchases – Charles Evans in a speech today.
“It is right that monetary policy remain supportive where appropriate,” said IMF director Christine Lagarde at the G20 summit in St.Petersburg today.
Responding to arguments over the impact of US Fed tapering talk on emerging markets, “I am pleased,” she added, “that the [group of 20 largest economies] recognizes the need to ensure that exit from unconventional monetary policy, when it comes, should be orderly and clearly communicated.”
“Frankly having a position [in precious metals going into the jobs data was] a little like playing red or black on roulette,” said Marex Spectron’s head of precious metals David Govett ahead of the data release.
Today marked the second anniversary of gold hitting its all-time highs for US and UK investors at $1920 and £1195 respectively.
Friday’s spike and slip back put gold at $1383 and £888 – some 1.0% and 1.4% down for the week.
“It looks increasingly probable that gold might trapped range bound between $1350 and $1450,” says a note from Mitsui’s dealing team in Singapore, “while waiting for new stimulus to kickstart the next move.”
Combating what they call “formidable selling above $1400, especially from gold producers,” the Japanese trading company’s dealers report “extremely bullish physical gold bar demand” in Asia.
“Physical gold demand in China has clearly picked up,” says bullion market making bank HSBC, commenting on Thursday’s Hong Kong gold import data for July.
“The recent pull-back in gold sub-$1400 may be an encouraging sign for price sensitive physical buyers to step back into the market.”
Over in India meantime – the world’s No.1 gold buying nation – gold earlier extended Thursday’s sharp losses, falling to a 2-week low and dropping over 5% from late-August’s fresh record highs.
The Reserve Bank of India today confirmed writing to temples in Kerala, asking them to report how much gold they currently hold.
But “the RBI has no plans to buy gold,” the central bank’s regional director told reporters.
“This exercise is nothing but part of a statistical exercise.”
With the G20 meeting continuing in St.Petersburg today, and noting the ongoing tension between Russia and the US over possible military strikes against Syria’s Assad regime, “We see any gold rally on the back of rising geopolitical uncertainty as a selling opportunity,” says the latest Commodity/FX strategy note from French investment bank Societe Generale.
“We expect ETF selling to pick up again thereafter owing to the focus on expected Fed tapering, rising real rates and a stronger Dollar.”
Ten-year US Treasury bond yields fell back from yesterday’s two-year high of 3.0% on Friday, while the US Dollar also turned south versus the Euro and Sterling.
Silver meantime jumped and held above $23.80 per ounce, rising back above last week’s closing level after the key US jobs data.
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Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold and silver in Zurich or Singapore for just 0.5% commission.
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