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Gold Price Hits 4-Week Lows, Holds 100-DMA 'But Not 50% Fibo Retracement' as 'Focus Moves' from Euro Crises to US Rate Rises
Thursday, February 12, 2015 9:45
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Adrian Ash is head of research at BullionVault, the world-leading gold trading & ownership service online…
GOLD PRICES held above last night's 4-week Dollar lows in London trade Thursday, but slipped against other currencies as European stock markets rose following a ceasefire agreement for eastern Ukraine but “no deal yet” between Eurozone member states and the new government of Greeece.
Global gold demand fell in 2014 to the lowest since 2009, says a new report from market-development organization the World Gold Council.
Within that figure, China's household gold demand fell 45% by Dollar value from what the report calls the “phenomenal” record of 2013, sparked by the metal's fastest price-drop in three decades.
India's gold jewelry demand in 2014, in contrast, rose to the highest second-half total since at least 2000 on the World Gold Council's series.
Expectations are now rising, says Bloomberg, that the Indian government will cut gold import duty from the record 10% level set by the previous administration.
“Illegal shipments have already slowed,” the Livemint news-site quotes Bachhraj Bamalwa of the All India Gems & Jewellery Trade Federation, thanks to wider import licensing and the abolition last November of the 80:20 rule which required one-fifth of new shipments to be re-exported.
“Gold prices held the 100-day moving average at $1216.50 this morning,” says an Asian trading note from Swiss refiner MKS, “but not a great deal of support beneath.
“The psychological $1200 level is next on the radar.”
Gold's sharp price drop at the end of Wednesday's US trade meant it “closed at $1219.75,” says the New York office of bullion bank Scotia Mocatta in a technical note, “breaking below the 50% Fibo[nacci] retracement level of the November-January rally.
“Bearish momentum indicators have accelerated further.”
“Throughout January,” writes precious metals analyst Bernard Dahdah at French investment and bullion bank Natixis, pointing to Greece, Euro QE and the Ukraine crisis, “developments in Europe were the main drivers behind the price of gold.
“Now positive developments in the US are beginning to overshadow events in Europe,” Dahdah says, most notably the outlook for higher Dollar interest rates after last week's strong jobs data.
“With gold being a zero-yield investment, an increase in interest rates will raise the opportunity cost of holding the metal [and] could lead to disinvestments into higher-yielding assets.”
But also citing this week's Financial Times interview with US Fed policymaker John Williams, “He's right yields won't be 1.66% if interest rates head to 3.0%,” says strategist Albert Edwards at French investment bank and London bullion market-maker Societe Generale.
“[US bond yields] will be close to zero as the economy implodes!”
The central bank of Sweden today joined Switzerland and Denmark in cutting its key interest rate beloow zero, moving to negative 0.1% per year and announcing QE bond-buying of SEK10 billion ($1.2bn) in a bid to stem the Krona's rise.
The Ukrainian and Russian presidents meantime agreed terms for a ceasefire, brokered with France and Germany, in the Donbas region starting Sunday.
The Eurogroup of currency union finance ministers will reconvene Monday, its leader Jeroen Dijsselbloem said overnight, after failing to make progress discussing the new Greek government's request to renegotiate some of Athens' 2010-2013 rescue loans.
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.
(c) BullionVault 2010
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Source: https://www.bullionvault.com/gold-news/gold-price-021220153
