Gold Bullion Bounces from 2014 Lows But "Lacks China Support" Against "Bullish Dollar"
Wednesday, 10/01/2014 14:45
GOLD BULLION rallied 0.9% from yesterday's new 2014 lows in Dollar terms in London on Wednesday, rising as European stock markets began the third quarter with a loss.
New data from private-sector ADP Payrolls said the US economy added 213,000 net jobs in September, in line with analysts forecasts.
The government's non-farm payrolls estimate – a key event for gold price volatility – is due Friday.
The Euro meantime held near two-years to the Dollar at $1.26, while Brent crude oil steadied at $95 per barrel, but corn prices extended their drop to new 5-year lows.
"With China on holiday" for the National Day start to Golden Week, says one Asian trading desk, "we saw little in the way of physical support" overnight, allowing gold bullion prices to dip below $1205 per ounce for the second time in two days.
Student leaders in Hong Kong's pro-democracy protests today demanded that the city's chief executive, C.Y.Leung, stand down by Thursday.
Crowds were
reported to be gathering in Macau – the other "special administrative region" in China, the world's No.1 gold-buying nation in 2013 – to show their support.
"The reason for the price slide" in precious metals, says Commerzbank's commodity analysts, "[is] the significantly appreciating US Dollar."
Whilst the US Federal Reserve is set to end its QE asset purchases this month, says bullion market maker and former London Fixing member Deutsche Bank – preparing the markets for a rate hike in the first half of 2015 – "We expect the ECB will in contrast announce QE over the same period."
That divergence "will be US Dollar bullish and long-term bearish for gold," say Deutsche's analysts, adding that "over the past 20 years, the US Dollar has typically rallied by between 5-10% in the six to nine months before the Fed embarks on a new tightening cycle."
"Overall," agrees the London office of brokers Marex Spectron, "the pressure will remain on the [precious metals] complex, and with the Dollar's continued strength, we remain sellers of rallies."
As silver prices bounced from fresh 4.5-year lows beneath $17 per ounce on Wednesday, platinum prices today slid to new 5-year lows, dropping 15% from July's one-year high.
Platinum's premium to gold fell this morning to $65 per ounce – the lowest level in nearly 12 months, and markedly below the near $200 premium seen at New Year.
Used primarily in auto catalysts by the motor industry, "Platinum
fundamentals do not justify prices below $1300," says Swiss bank UBS, "and the current weakness should be viewed as a buying opportunity."
"We view platinum price as too low at $1300," agrees South Africa's Standard Bank – whose commodities unit is 60% owned by China's ICBC, the world's largest bank by assets – although "we don't expect it to rise much above $1400 anytime soon."
Looking at gold bullion, prices "will struggle to gain upside in the next two quarters" to spring 2015, Standard Bank goes on in its latest
Global Commodities review.
Any "stronger physical demand from Asia on the back of seasonal trends" will fail to drive prices higher, the research says. "Short-covering rallies" led by bearish traders closing their bets against gold "will ultimately fade."
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