A week in gold: Price dips below US$1,300
London (Mar 29) It was a week for the bears as the decline in the gold price over the past fortnight rose to almost US$100.
All the safe haven buying on the back of Russia annexing Crimea went into reverse as markets took stock of new Federal Reserve chairman Janet Yellen’s comments that that US interest rates may rise six months earlier than anticipated.
The US dollar, which traditionally moves in the opposite direction to the gold price, rallied on the back of the comments and was further boosted this week as US jobless claims fell to a three-month low while the last quarter’s US GDP was nudged higher on revision. The situation in Ukraine was also seen as stabilising.
Evy Hambro, the manger of Blackrock’s World Mining Trust, expects the price to remain around the recent range.
At US$1,300 the price is where it was before quantitative easing started and the QE premium has now disappeared, he told Bloomberg.
Commerzbank meanwhile said that the price had not only dipped under US$1,300 but was now below the technically important 200-day moving average.
The broker noted that gold ETFs recorded slight inflows again on Friday, having seen outflows in the two previous days, which suggested speculative financial investors were likely to have been mainly to blame for the price slide.
One absence from the market is recent weeks has been demand from Chinese investors, which was credited with the price rally in January ahead of the Chinese New Year.
Hambro said the upsurge in demand from China had been one of the most exciting developments in the gold market recently, though there were questions over where the gold was going.
He said the 1,000 tonnes plus China is now importing was a huge amount especially as China is also the world’s largest gold producer.
Reports have suggested the gold is going into central bank reserves, which he said would be a positive for market in short term especially with reports of other central banks buying.
Iraq’s central bank bought 36 tonnes of gold this month, its first addition to its reserves since August.
The purchase more than doubled the country’s gold holdings to make it the 43rd largest official sector bullion holder in the world. It wa also the largest purchase of gold by the country for three years.
The purchase was worth US$1.5bn, but again reflecting the current uncertainty over the market's direction the fact the price was unmoved by such a large buy was discouraging for some commentators, who suggested it was Iraq’s buying that may have sparked the recent rise to over US$1,350.
On Friday, spot gold was trading at US$1,292, around US$25 lower on the week.
Source: ProactiveInvestors.UK
