Gold Prices Cut 3.1% Jump in Half, "Risk of More Short-Covering" If US Jobs Data Weak
New York (Dec 5) GOLD PRICES continued to tick lower from yesterday's sudden 3.1% jump in London trade Thursday morning, edging below $1230 per ounce as Asian stock markets closed lower but European shares held flat.
Silver also halved its gains from Wednesday, trading lower in line with gold prices at $19.40 per ounce.
Neither the European Central Bank or Bank of England made any changes to their record-low interest rates, lending or quantitative easing at their December meetings today.
UK chancellor George Osborne forecast to Parliament that the government will run a budge surplus as soon as 2019.
The Pound fell towards 1-week lows.
Gold prices in Sterling slipped to £754 per ounce, 1.8% above Wednesday lunchtime's new 3-and-a-half-year low.
"Mixed signals" says technical analysis of Dollar gold prices from French investment bank and London market maker Societe Generale.
"Short-term, gold has bounced," but the bank's chart analysts still target a drop below June's low of $1180 within 1 to 3 months.
Wednesday's action "formed an outside day reversal warning," says ScotiaBank's technical analysis, with gold prices hitting a new 5-month low but ending US futures trading sharply higher.
"However, as the daily trend remains bearish, the signal would have to be confirmed by an up day [on Thursday]."
Following what Commerzbank's commodity team calls "a sharp reversal immediately" on the release of yesterday's much-better-than-expected US jobs data from the private ADP payrolls service, "a short covering rally ensued" it says, with bearish traders betting on lower gold prices forced to close their positions as the market rose.
Ahead of Friday's official US jobs data, "The markets are still positioned quite short," reckons ANZ Bank analyst Victor Thianpiriya, quoted by Reuters.
"There is going to be a bigger reaction to a weaker-than-expected nonfarm payrolls report than to stronger-than-expected numbers."
Looking further ahead, "Tighter monetary policy in the US and rising rates are hanging over the market," said a note from Bank of America-Merrill Lynch analysts this week.
"[That] could push gold prices towards $1100 per ounce in 2014," it believes. "Yet while the pause in the bull market may continue, we see several encouraging signs, most notably physical demand from emerging markets, that suggest...gold remains a sound medium-term investment."
But "we are seeing continued outflow of gold investment holdings," counters one Singapore trading desk in a note, "and the physical demand from Asia seems insufficient to halt gold's decline."
Gold prices achieving "a successful hold above $1180 would...be the best case scenario amidst mounting bearish pressure," it adds.
Crude oil meantime rose to 5-week highs Thursday morning, with Brent crude touching $112 per barrel, after the US reported a sharper than expected drop in weekly stockpiles.
The Opec oil cartel of 12 major producer nations yesterday maintained its 30 million barrels-per-day quota for 2014, but may have to cut output by 2.5% later next year to support prices, reckons Gareth Lewis-Davies, senior energy strategist at French investment bank BNP Paribas.
India's DNA news-site says half-a-tonne of gold is being smuggled into the country each day, citing "top officials" at the Directorate of Revenue Intelligence.
"Contrast this 15 tonnes per month with finance minister P.Chidambaram's target of 20-25 tonne [of legal] imports," says DNA.
