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Ahead of Fed, US Inflation Data See Bullion Prices Jump Out of Tightest Range in 7 Years

Wednesday, September 16, 2015 7:21

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

GOLD BULLION jumped out of its tightest range in 7 years Wednesday in London, rising 1% to $1115 per ounce as new data – released a day before the Federal Reserve’s long-awaited September interest-rate vote – said US consumer prices fell last month.

That put the headline annual rate of CPI inflation at just 0.2%, way below the Fed’s official target of 2.0%.

Dollar prices for delivery of wholesale bullion had moved “in a $8.05 range on Monday and Tuesday,” says Bloomberg, calling it gold’s “smallest [two-day] move in eight years.”

“Gold continues to trade in a very narrow range ahead of the Fed announcement,” agreed a note from the commodities team at ICBC Standard Bank, “though the US inflation figures…appeared to trigger a rally in silver…and lent gold some support too.”

Silver prices outpaced the gain in gold bullion, rising 3.5% to a 1-week high at $14.85 per ounce “likely exacerbated by stops and short covering,” says Standard.

“A late and seemingly orchestrated rally in Chinese equities, just before close of play,” it adds, “spill[ed] over into the base metals.”

Copper prices earlier rose 1.2% as Shanghai’s stock market – actively supported by the Chinese government since beginning a 35% slump this June – leapt almost 5% in the last hour of business.

Now trading just below Friday’s 8-week high, copper is set to rise in 2016 according to analysts at US bank Citigroup, thanks to heavy cuts both to production and longer-term exploration and development following the last five years’ near halving of prices.

On the supply front in gold, mining unions in South Africa – already the world’s most expensive major gold producing nation – were split Wednesday over accepting the 14% wage increase offered by world No.3 miner AngloGold Ashanti, world No.7 Harmony Gold, world No.9 Sibanye Gold, and the smaller Evander Gold Mines.

The National Union of Mineworkers (NUM) recommended its members accept, but the equally large Association of Mineworkers and Construction Union (Amcu) said it was “very disappointed the offer [was] more or less similar the offer that our members rejected in the early stages of negotiations.”

Against an 8% annaul drop in the global average cash cost of mining gold in the second quarter of this year – down to $664 per ounce – South African costs actually rose 3% year on year, according to data compiled and analysed by the Metals Focus consultancy.

“This came in spite of a 15% weakening of the Rand,” Metals Focus noted in a report last month, “as activities were impacted by increased salary costs, electricity tariff hikes and a 6% decline in the average grade of ore processed.”

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/bullion-fed-091620151

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