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Gold Price 'Positive' as Dollar Rises, China Crash Stemmed, Oil Erases Spike

Tuesday, January 5, 2016 7:35

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

GOLD PRICES gained versus a rising US Dollar in Asia and London Tuesday, touching $1080 per ounce for the second day running as Beijing intervened to stem a second crash in China’s stock market, and crude oil reversed yesterday’s surge from new 11-year lows despite increased Middle East tensions.

Western stock markets crept higher after China’s securities regulator injected $20 billion into its domestic money markets and warned of new measures to prevent corporate insiders from selling stock.

US Treasury bonds rose in price again, however, as commodity markets held flat and the Euro retreated to a 1-month low against the Dollar after weaker-than-forecast Eurozone inflation data.

“That gold gained this week on the back of risk-off sentiment and equities selling off is a positive for gold,” says a note from Swiss investment and bullion bank UBS, because the metal had shown “unstable performance as a safe haven” by moving closely in line with stockmarket shares during the last 3 months of 2015.

“Now that the Fed has started its tightening cycle, there is scope for some normalisation…Gold needs to re-assert its role as a safe haven and as a viable hedge against investors’ exposure to equities.

Monday’s action saw no net inflows or redemptions from either the giant SPDR Gold Trust (NYSEArca:GLD) nor the iShares Silver Trust (NYSEArca:SLV).

For non-Dollar investors, Tuesday saw gold priced in Euros hit 1-month highs above €1005, while the Sterling gold price hit 2-month highs above £736 as the Pound fell to its lowest USD value since April 2014 despite a stronger-than-expected reading of UK construction sector activity on the CIPS-Markit PMI survey.

“With gold and silver prices having been the best of a bad bunch in 2015,” says the latest weekly note from analyst Jonathan Butler at Japanese conglomerate Mitsubishi, “commodity investment index rebalancing [around] 8-14 January could see a sell-off in these metals and some net buying of [platinum-group] metals.

“However, the volumes traded are likely to be quite modest in comparison with recent movements in speculative futures positioning,” Butler adds, and so “price impacts may be limited.”

New data released Monday showed large speculative traders in Comex gold futures and options ended 2015 holding just 1.18 bullish for every 1 bearish bet – the lowest New Year’s ratio since 2001.

Notionally equivalent to 73 tonnes of bullion, last week’s net speculative position of bullish minus bearish bets was larger than start-December’s new 14-year low, but 49% smaller than the last 5 years’ average.

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Comex silver contracts, in contrast, ended 2015 with large speculators holding a net bullish position equal to 85% of the last half-decade’s average, and substantially larger than New Year’s Eve 2011 or 2013.

Having dropped all of Monday morning’s 5% jump in late afternoon trade, Brent crude oil meantime held little changed today around $37 per barrel.

That extends a run of the highest Gold/Oil ratio since the late-1990s according to Reuters’ data, with one ounce of bullion now worth 29 barrels against a low beneath 7 barrels at oil’s peak price of 2008.

Sunni-majority Kuwait today followed Bahrain and Sudan in recalling its ambassador to Iran following Sunday’s violent protests at Saudi Arabia’s embassy in Tehran over Riyadh’s execation of a Shia cleric.

“There is no chance of Saudi Arabia scaling back its oil supply to make space for Iranian oil if the sanctions against Iran are lifted,” note commodity analysts at Frankfurt-based banking and financial services provider Commerzbank – something the German Federal Foreign Ministry says could happen in January.

“In other words,” Commerzbank says, “the existing oversupply [of crude oil] may actually grow further in the short term” rather than prices spiking on the political row.

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.

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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-price-010520164

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Comments

Total 1 comment

VirusGuard

“Tuesday, touching $1080 per ounce”

Lots of people said that gold would never go below $1200 but they were wrong.

“the existing oversupply [of crude oil] may actually grow further in the short term” rather than prices spiking on the political row.”

And whats the bigest part of the production costs in mining new gold ? Does it begin with an “O”

Will we see panic selling if gold goes below $1000 ?

I’m better with silver and yes i know its fixed so anything could happen but i am calling it under $12oz before i add to my reserves but this time i will stick more with coins and not bars if the above spot rate is not too high a premium

Jan 5, 2016, 10:21 am 0 Reply

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