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Gold Prices 'Struggle to Recover' as China Demand Ebbs Before Lunar New Year, 'Geopolitics to Beat Fundamentals' in 2015

Tuesday, February 10, 2015 7:12

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Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…

GOLD PRICES slipped in London trade on Tuesday, giving back an earlier 1% rise from last week’s finish as Eurozone stock markets rose and commodities fell.

Major government bond prices retreated, nudging interest rates higher.

Ten-year US Treasury yields crept higher to reach 2.0% – an 18-month low when hit in January – for the first time in a month.

The overnight lull in gold prices meant “Chinese demand came right on cue at the open once again,” says one Asian dealing desk, “although not as strong as Monday.”

“The recent $30-decline in gold prices,” says a note from Swiss investment and London bullion bank UBS, “[is] perhaps encouraging some last-minute buying out of China for the Lunar New Year festivities.”

But more broadly, “India and China are not buying right now, our books are not full,” said Frederic Panizzuti, CEO in Dubai for Swiss refiner MKS at the annual Richcomm Commodities Outlook on Sunday.

“We expect to see some buying from March and April onwards,” said Panizzuti – winner in 2014 of the London Bullion Market Association’s gold price forecasting contest.

Crucially for 2015 prices, he added, “We have put fundamentals aside in our gold outlook.

“[Because] geopolitics, the perception of risk and even emotional risk from investors, are the main drivers this year.”

Panizzutti is the second most bullish gold forecasters in the new 2015 LBMA survey, but only with an annual average prediction of $1292 per ounce – a mere 2% rise from last year.

Investment gold holdings needed to back shares in the largest exchange-traded gold fund, the SPDR Gold Trust (NYSEArca:GLD), were unchanged Monday at 4-month highs, some 10% larger from the New Year’s half-decade low.

Silver bullion held to back shares in the iShares Silver Trust (NYSEArca:SLV) was also unchanged near 1-year lows, down almost 9% from November’s three-year high.

“With China trade likely to be quiet into the Lunar New Year,” says a note from Standard Chartered – now a market-making member of the London bullion market – “gold may struggle to recover lost ground this week.”

Friday’s US jobs data, StanChart says, added “to views that the Fed tightening cycle could now start earlier than current consensus…[outweighing] the recent focus on currency volatility, Euro-area concerns, rate cuts and extra QE outside the US.”

Gold priced in the Dollar today tracked back down to $1234 per ounce, unchanged from last Friday’s 4-week closing low.

The Euro meantime flicked around $1.13 to the US currency, a 13-year low when hit amid last month’s Swiss peg and Eurozone quantitative easing news.

That held Euro gold prices at €1095 per ounce, some 6% below late-January’s 21-month high of two week’s ago.

Formerly City correspondent for The Daily Reckoning in London and head of editorial at the UK’s leading financial advisory for private investors, Adrian Ash is the editor of Gold News and head of research at BullionVault – winner of the Queen’s Award for Enterprise Innovation, 2009 and now backed by the mining-sector’s World Gold Council research body – where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

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.

Source: https://www.bullionvault.com/gold-news/gold-prices-021020152

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