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Why is the Gold Price Up 6.35% in Sterling this Month?
It isn’t long after writing my gold forecast for 2016 that I am re-reading it and thinking how much more of it will come true.
As I had suggested in it, so far this year we have had middle-eastern rising tensions and poor data from China, two prominent aspects of my gold forecast that were set to boost the price. The one augury in my forecast that I thought would happen sooner rather than later was a Bank of England rates rise. In my mind the UK were going to have to follow the US sooner rather than later to keep the strength of the pound – but Mark Carney yesterday whilst speaking at Queen Mary’s University London, stated that an interest rates rise for early this year was off the cards. Understandably, as Carney cited yesterday, given the current attenuating global economy, the oil price dropping further combined with poor UK wage growth, an interest rates rise has been pushed back. It is possible that if the global economy conditions continue in this vein, a rates rise may well be set back further than expected: late 2016 early 2017. Click here to read Carney’s full speech here.
The gold price so far: Jan 4th – Jan 20th
In numbers the gold price opened on 4th January:
£725.019 / $1072.70 / €982.299 with currency GBP – USD at 1.4716.
Today Wednesday 20th January, the gold price opened:
£771.081 / $1093.20 / €999.726 with currency GBP – USD at 1.4158.
In total the gold price has moved: £46.062 (+6.35%) / $20.5 (+1.91%) / €17.427 (+1.77%) with currency -0.0558 (-3.79%).
With the Sterling price against the Dollar falling dramatically, with more pressure coming from the Bank of England announcement, gold valued in Sterling is likely to be given an uplift. For how far and for how long, remains to be seen. What I’m convinced of, more now than ever, if the US are intent on more rates rises (which traditionally after a rates rise after recession, more rates rise follow soon after), the US Dollar is going to run away and be overpoweringly dominant. It would not surprise me if a currency correction is in full swing.
Article by Michael Cooper
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Round up of Today’s Gold Price News – Top 3 Articles
A quick look at Today’s gold price news and a brief summary of the Gold Price for the month of July.
Swiss Gold Refinery Valcambi Sold
In today’s gold price news, well-known Swiss gold refiners Valcambi have been sold to the world’s largest Jewellery manufacturer Rajesh Exports Ltd. (REL).
It is no surprise Rajesh Exports have purchased the Swiss refiner. Earlier this year it was reported that the jewellery manufacturer were on the hunt to purchase a refiner and just this month it was widely circulated that REL were looking to take a large stake in Valcambi. Valcambi’s sellers, Newmont Mining Corporation, stated in a press release “we are pleased that Valcambi is being acquired by Rajesh Exports with whom we are continuing our long term contracts and we are confident Rajest Exports will maintain the high standards of Valcambi”
This acquisition has made big news in the gold world, partly because it shows the ambition of the manufacturer to expand its holdings in the precious metals industry. It is more than likely that the purchase will marry together the much sought after Valcambi-Swiss brand with REL’s wider customer base in Asia. To read the full statement Rajesh – Valcambi Press Release.
Dollar Spikes after FOMC Statement & US Data
Afer the FOMC meeting on Tuesday, the committee released a FOMC Full statement on Wednesday with an update about the US markets and indications for the impending interest rates rise. In truth, the minutes did not reveal any information not already in the public sphere and it reinforced the sentiment that it would be looking for specific indicators before any incremental raising of the interest rate “When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.”
Also this week US Weekly Jobless Claims were released, beating the forecast of 275,000 with data of 267,000. US Q2 GDP also released better than expected results with growth estimated to be 2.3%, much improved from the 0.6% last quarter.
Following these announcements, the dollar rose to a one week high and has gained just over 8 percent this year.
Paper Gold Sell-off Continues
After Shanghai’s huge 33 tonne sell-off of gold a couple weeks ago, the ETF sell-off hasn’t been abated. Trade reports have intimated that gold holdings are at their lowest since the end of 2009, with outflows recording their eleventh consecutive day. SPDR Gold Funds (GLD) traded on the NYSE, are currently trading at their lowest since mid October 2009 where the price was near the current 104.27. The volumes trading in Oct ’09 were 357.92M compared to 6.66M currently. It appears there is a more gradual slide with the lower volume of trading, with a majority weighted in selling.
Verdict:- It has been a difficult month for the gold price: at the beginning we were watching the Greek tragedy unfold, we’ve seen growth in the UK & the US, currency battles continuing and the Chinese dumping 33 tonnes of gold, only to publicise the first time in 6 years, they have increased their gold reserves considerably. Gold Price News has been coming thick and fast this month and the price has been forced to 5 year lows. Where will the bottom be?
More gold price news next week
Article by Michael Cooper