Gold rally runs out of steam, bumpy road ahead
LONDON (July 11) Gold business was bumpy, with prices dipping in and out of negative territory on Thursday morning, as the market digested US FOMC comments released yesterday.
“The volatile reaction of the gold markets to the Fed minutes, which showed rapid short covering followed by selling and then fresh buying, implied fast-changing investor sentiment to the minutes,” said James Steel at HSBC.
Spot gold saw a session high of $1.299.15 per ounce in early morning trading, but the rally soon ran out of momentum, and prices have since slipped into negative territory, down $2.80 on the previous day’s close at $1,285.70/1,286.50.
“Today will be a bit jumpy, with the short-term market long and looking for higher numbers. As such, there may be some profit-taking at some stage and this may provide a chance to buy dips,"said David Govett at Marex. "Initial Jobless Claims out this afternoon may provide a few fireworks so keep an eye out for that.”
The minutes showed that the FOMC engaged in an in-depth discussion about how financial markets were reacting to quantitative easing and what might be the best approach to eventually exit QE3. The Fed is currently committed to purchasing $85 billion in new debt per month in an open-ended programme.
“If yesterday’s FOMC Meeting minutes put some doubt in the market whether tapering would start in September, then we imagine the market is now once again primed to see good US economic news as a sign that QE may after all start in again in September. So a bumpy road lies ahead and that is likely to mean more choppy rangebound markets, albeit possibly in a wider range,” added FastMarket analyst William Adams
“The rise in US real yields reduced the attractiveness of holding gold as opportunity costs increase. We consider the current bounce an opportunity to sell,” said Credit Suisse.
In the wider markets, the dollar fell sharply, last at 1.3045 against the euro. On the data side later, regular weekly US unemployment claims are published this afternoon and are expected at 342,000 against the previous week’s 343,000.
Physicals business remains steady, said Steel, adding that the US Mint reported it has sold 21,000 ounces of gold coins so far in July.
“At that pace, total sales for the month would be 69,000 ounces, up 125 percent from a year earlier. Also, the US Mint reported it sold 1,648,000 ounces of silver coins so far in July. At that pace, total sales for the month would be 5,414,85 ounces, up 137.7 percentr from a year earlier. Chow Tai Fook, the world’s largest jewellery chain, reported a 48 percent jump in gold-product sales for the first quarter,” said Steel.
ETF holdings followed by FastMarkets showed ZKB holdings rose 5.1 tonnes as Swiss investors bought into price weakness.
The rest of the complex was mixed, silver was last at $20.04/20.09 against the previous close of $19.92. Platinum increased $3 to $1,395/1,405 while palladium at $721/727 was down $1
