Gold Price ‘At Risk’ from Fed

Not just the Fed – Dollar & Jobs Data as India Seeks to Curb Demand, Trading Slumps, Mine Output Grows

Bullion.Directory precious metals analysis 05 November, 2015
By Adrian Ash
Head of Research at Bullion Vault

GOLD PRICES retreated to yesterday’s new 1-month lows in London trade Thursday, slipping near $1106 per ounce as US bond yields rose further following Federal Reserve chief Janet Yellen’s comment that a rate rise from 0% will be a “live possibility” at the central bank’s December meeting.

New York Fed president William Dudley said he “agreed” with Yellen’s view, while vice-chair Stanley Fischer said separately that on core inflation data, “We’re not that far from the 2% target” previously given as a reason for postponing a rate rise.

“Their comments will have an extra impact” on gold prices, reckons Dutch bank ABN Amro’s analyst Georgette Boele, “because the US Dollar is also directly affected.”

While ABN Amro expects the Fed to delay its first rate rise until 2016, “the risk for a hike this year has increased. In addition…a stronger [US jobs] report [due Friday] should send precious metal prices lower.”

Silver dipped to new 5-week lows beneath $15 per ounce Thursday as the US Dollar rose on the currency market, and 10-year Treasury yields edged up towards the highest levels since late July at 2.26% per year.

Demand and supply at the twice-daily LBMA Gold Price auction – the formally regulated benchmarking process which replaced the century-old “fixing” in March this year – balanced on very low volumes Thursday, barely equal to one-fifth of July to October’s average level.

New data from Japan’s Tocom derivatives exchange today showed gold trading volumes in October falling 36% from the same month last year.

The world’s largest silver-backed exchange-traded fund, the iShares Silver Trust (NYSEArca:SLV), closed Wednesday with its quantity of bullion unchanged near 3-year lows beneath 9,757 tonnes – down 10% from early November 2014.

Gold’s largest ETF, the SPDR Gold Trust (NYSEArca:GLD), in contrast shed another 6 tonnes as stockholders liquidated shares, taking the total bullion needed to back the fund down to 680 tonnes – the smallest since late September, and less than 2% above August’s 8-year low.

Narendra Modi – prime minister of India, the world’s heaviest consumer market for gold – meantime launched 3 schemes Thursday aimed at distracting household savings from buying new physical metal in a bid to cut the country’s huge bullion imports, which rose 5% to 822 tonnes in 2014, with smuggling of perhaps a further 200 tonnes on top.

A lacklustre start to gold buying ahead of next week’s key Diwali festival could continue to disappoint Indian retailers, an article on Bloomberg View says, because poor rainfall likely means a poor harvest for the farming families who account for the bulk of the sub-continent’s jewelry demand.

Matching India with one-quarter of global end-use demand, China’s consumer gold demand has risen almost 8% so far this year from the same period a year ago, new data said Thursday from the state-mandated China Gold Association.

Long term, China’s appetite “could fall,” reports Reuters, citing analyst comments, “as the country moves to free the Yuan, enabling savers to gain direct access to foreign stocks or bonds.”

Mid-tier gold miner Randgold Resources (LSE: RRS) today joined world leaders Barrick and Newmont in reporting heavier output for Q3 as benchmark prices averaged 6% less than Q2 and 12% less than a year before.

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