Tag Archive: Gold Price

  1. Why is the Gold Price Up 6.35% this Month?

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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 in 2016

    The Gold Price in 2016

    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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  2. Interest Rates Rise: What now?

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    Interest Rates Rise to 0.5% – So What Now?


    US interest rates have finally been raised to 0.5%. Unsurprisingly, the world hasn’t ceased and the markets are so far so good. When reality hits, as is always the case: you prepare for something that is going to happen always fearing the worst but the worst never actually comes. A bit like climbing with a harness, you never actually fall off the wall but you are thankful it is there all the same. The markets seemingly have followed this rule. So far the gold price has not fallen as commentators had suspected. In Sterling (GBP) and Euros (EUR) the gold price has done the opposite, as currency depreciation against the dollar has buoyed the price in other currencies. Likewise in Dollars, the price of gold has barely moved.

    GBP Gold Price

    EUR Gold Price

    Interest Rates already factored in to the gold price

    Interest Rates already factored in to the gold price

    Interest rates rise

    Interest rates rise has boosted the price of gold

    Sterling in 3 months has fallen 1.57 GBP/USD to currently 1.4974. Likewise the Euro has fallen from 1.15 EUR/USD to 1.09 EUR/USD. These currency movements have a definitive impact on the gold price depending on your local denomination.

    Yesterday, I was explaining to a client what could happen in 2016 in relation to the gold price in the UK. It is more than likely that the dollar will continue its dominance well into 2016, especially if as time goes by the interest rates rise doesn’t sink the ship. Then it is likely we will see another 0.25 basis move to 0.75% and even an unthinkable 1% before long. If that is the case, the pressure on the gold price in dollars is likely to move hesitantly lower but given the currency battles, even a drop to say $1,040 per oz, the GBP/USD currency price will also shift in the dollar’s favour.

    For example a drop of $25 in the gold price to $1,040 combined with a currency movement to 1.47 will mean that gold in sterling, will still be over the £700 confidence line at £707, only 6 pounds lower than it is now. Not exactly eye-watering.

    Verdict: – So far the interest rates rise hasn’t sunk us all. No doubt in the coming weeks and months much will be made of any negative financial news that is published. Truthfully, an increase in the interest rates is a good thing. Economies around the world are recovering and we should all return to our light-headed exuberance of pre-recession. That’s of course if you haven ‘t lost faith in the banking system and you accept the ignorant bliss of wilful memory loss, to forget the economic mess we were recently in. My memory however is sharper than ever.

    Gold Price Range
    Article by Michael Cooper
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  3. Gold Price this December – what’s in store?

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    Gold Price this December – what’s in store for the rest of the month?

    Finally it is December and we are into the home straight to Christmas and the end of the year! November went quickly enough and I don’t begrudge the month before Christmas – we had Guy Fawkes’ Night, Diwali, Thanksgiving (if you’re American), Black Friday and Cyber Monday – I really cannot complain despite not cashing in on discount prices. But for me there is always a feeling about December I can’t quite shake. I guess it is the knowing that holiday is coming and it is another year to chalk up. It may also be that I’ve rather boldly brought out my Christmas jumper immediately upon entering December and am having to justify it to work colleagues. Whatever it is, I get all doe eyed about the thought of snow, mulled wine and terribly dressed trees that have no real reason to be taking up half the living room. Sadly for me, gold waits for no man – except forgotten hoards at the bottom of the ocean. So what is in store for the gold price this December?

    Gold Price this December

    Gold Price this December – Our Snowy Sovereign Box

    The gold price this December is nearing the lows it achieved in August this year, which until then hadn’t been achieved since February 2010. With talks of interest rate hikes and the FOMC still on the path to raise rates before the end of the year, the gold price this December may well re-test the lows we saw earlier in the year. The reality of the rates rise will for the short term mean the ETF’s may well short gold and the gold price in Dollars will likely go down if the rates do actually rise. For the UK, the gold price should be met with greater resistance. The fallout from an interest rate hike in the States will inevitably lead to a stronger dollar against the pound, which will help to keep the gold price from falling too far in sterling.

    Other than the never-ending debate about the rates rise, the gold price this December and for the rest of time, will always be subject to other world events:

    The horrific recent events in France and the subsequent escalation in Syria, has led to a UK vote in the House of Commons today to decide whether the UK will join the coalition in bombing Syria. As with the Ukraine – Russia conflict last year, military action sadly tends to keep the gold price high, as businesses with larger operations overseas will use gold to hedge against uncertainty. Likewise another bi-product of war is the use of precious metals which again is likely to keep commodity prices on an even keel.

    Consideration has also to be given to global economies and financial data, in particular any news from China will be highly scrutinised. Likewise information released from the Bank of England and European Central Bank will be closely followed. What will be interesting is the data published following commercially driven Black Friday/Cyber Monday sales and also December Christmas sales. That will be a good indicator as to whether consumer spending reflects the moderate economy recovery central banks analysts lifelessly cling too. We’ll have to wait for that.

    Verdict:- The gold price this December as has been the case for the last year, is dependent on the FED’s rate rise and whether it falls this year or early next year. Ultimately it is all elementary, gold’s main asset has always been as a form of hedging and that will never be redundant. What determines the price of gold is everything and anything. Expect the unexpected.

    23 days to go…Gold Price this December

    Article by Michael Cooper
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  4. Weaker Gold Price Amid BoE and FED Announcements

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    A Weaker Gold Price Amid BoE, FED and Currency Movements

    Today’s gold price fell to £719 ahead of the Bank of England’s (BoE) announcements at 12pm. This, combined with the Federal Reserve Bank’s (FED) hawkish sentiments led by Janet Yellen, has sent currencies into volatility and has lead to a weak gold price.

    BoE Announcements Today
    BoE Governor: Mark Carney

    BoE Governor: Mark Carney

    Today was yet another Super Thursday in the financial calendar and I’m sure one that we were all looking out for. Today the BoE announced that it was going to be keeping interest rates to 0.5%. The Monetary Policy Committee (MPC) made up of nine members able to vote on policy decisions, voted 8-1 to keep interest rates at the current level. In September the CPI was at -0.1% which is considerably below the 2% inflation target the Chancellor & Mark Carney have cited for the UK to raise interest rates.
    Mark Carney has issued an open letter to the Chancellor, George Osborne, explaining as to why he couldn’t obtain the target for inflation, citing oil prices, the strength of sterling on imports and the global economic slowdown (in essence China), as the main reasons.
    The BoE have been fairly dovish in the recent release and this has already hit the sterling price with the pound falling against the dollar from 1.5404 to 1.5271 (as of writing this). The hit on the pound will help to lift the gold price in sterling.

    Hawkish FED

    The FED on the other hand have been bamboozling the markets (and probably themselves) by appearing to be Hawkish in their recent announcements. Yellen and the FED surprised markets and investors with the announcement that interest rates could be increased before the end of the year. The growth although not quite a strong as the FED had anticipated, did receive positive news in the form of stronger consumption growth at 0.8% which shows strength in the economy. A rates rise sooner rather than later will continue to keep the dollar on the front foot and help to maintain currency strength. It will yet to be seen whether the FED will follow through with this and it would be expected that the US would at least need to see another couple of positive figures (labor market/ non-farm payroll etc.) being published before it would be seriously considered.

    Verdict:- Despite the BoE suggesting an early next year rates rise, it is probably not likely until May/June next year and again it is only likely to be a +0.1% increase. The BoE may well try and ride the US rates rise (presuming that happens in the early part of 2016) but it is going to be more of a struggle for the UK economy. The gold price in dollars is likely to have a lot of downward pressure next year, however if the results don’t come through and the sterling price continues to be hit, the yellow metal will hold.

    Article by Michael Cooper
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  5. Gold Price Update: near two week highs

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    Gold price update – gold holding to higher price


    For this week’s news piece we thought we would go back to basics and speak purely numbers and stats about the current gold price. As I write this, gold is sitting at £751.56, $1,150.20 and €1,020.90 respectively. For the Dollar, we are sitting at near two week highs for the price with the PM fix on the 24th September at $1,154.50. For Sterling and the Euro we aren’t quite at that benchmark, only yesterday we had slightly higher prices for both and before that we only need look to the 25th. Not particularly surprising information.

    I think the more interesting analysis occurs when you look before the 24th and 25th September. To see high prices of £750, $1,150 and €1,020 you have to actually go back quite a way. The last time sterling hit the £750 ceiling was back in the 10th July and it tested that price only for about a week. The Euro hasn’t been too dissimilar, it hasn’t hit the $1,120 mark since the end of July, though before that, like Sterling it was performing significantly stronger earlier in July/June. For the Dollar the cycle has been significantly shorter. The price has hit $1,150 far more readily, it hit it a couple of times in September, again in August and in July.

    Gold Price Conundrum

    Where next for the gold price?

    So what is the gold price doing and where is it going?

    In truth, a lot of the peaks and troughs coincide with market data: non-farm payroll, weekly jobless claims and most importantly Federal Open Market Committee minutes about rate rises. The markets always tend to sit and trade down before big market decisions. Earlier this year around the July period it was looking likely that a rates rise was on the cards for September – or so the FOMC and Janet Yellen had been keen to publicise. The gold price took a bit of a fall in all currencies towards the end of July and remained lower in August across the board. As is the reality of such things, as the deadline loomed for September rates rise but with continually bad data being announced, the gold price began to increase again as investors flooded back into the precious metal as the rates rise became increasingly unlikely.

    Verdict:-The gold price is higher than it has been but now the talk is of a possible December rates rise or an early 2016 rates rise, which could put pressure back on the metal. The sceptic that I am, I’d still be surprised if they go ahead with December. Even if they do, in truth a nominal increase wouldn’t create the waves we are all thinking it might. The market will go crazy for a couple of weeks, that is a given and then the monotonous reality will kick in that 0.25% increase is really trivial. Yellen and her gang aren’t going to raise it if the US aren’t ready – they can’t raise it and lose face by having to drop it again – can they?

    Article by Michael Cooper

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  6. Why is the gold price rising?

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    Why is the gold price rising? – Gold Analysis


    Why is the gold price rising? Before delving straight into the answer – let’s look at the numbers.
    As of writing this article, the LBMA afternoon Gold Fix has just been announced at £737.070, $1156.50, €1023.768 respectively (which by the by we tweet everyday – for those of you interested!). The price in sterling on the 6th August was £694.566 just over two weeks ago. This equates to a range of £42.514 during this trading period, meaning that the price of gold has risen 6.12% in a 15 day period from the AM fix on the 6th to the PM fix today. That is notable movement for the yellow metal. The last time the price was this high was over a month ago on the 15th July where it then took quite a tumble – good news came out about Greece amongst other things.

    So after looking at the numbers, what news has come out that can answer: ‘Why is the gold price rising?’

    Chinese Yuan Devaluation and What it means

    The primary reason for golds sudden resurgence is China’s devaluation of its currency the Yuan, with the biggest single devaluation in 20 years. After a number of financial reports published that all pointed to China’s growth slowing down drastically, with exports in June falling a massive 8.3% alone, the Chinese central bank made the decision to devalue the Yuan, making exports significantly cheaper. For gold and other commodities, the lower usage by world’s largest consumer of commodities combined with the fall in growth, caused a big slide throughout June to August. With the shock three day devaluation on the 11th August, ending on the 13th August, causing a 4.4% fall against the dollar has meant an increase to the gold price. The PM gold fix on the 10th was £706.511, $1097.00 and €999.863 and by the 13th (the final day of Yuan devaluation), the gold PM gold fix was £716.646, $1116.75 and €1004.543.

    Why is the gold price rising - china devalues the yuana

    Why is the gold price rising -China devalues the Yuan

    The Yuan announcements caused huge ripples in the Asian financial markets, with the Nikkei, amongst others falling considerably until Chinese assurances of no further devaluations in the pipeline. In Europe and the States, naturally the devaluation caused spikes in the FTSE 100 and the NYSE but these have proved to be short lived, as the realisation of what the consequences of a cheaper Yuan will mean in the long run for the respective economies of the UK and US. In particular the US will eye the devaluation of the Yuan, as nothing more than a suppressive tool in their already under-performing inflation of 1.3%, as the FED have not been quiet to point out that a minimum of a 2% target will have to be achieved until they can commit to an interest rates rise. The US’ CPI data also hasn’t helped proceedings, as the consumer price index has expressed stagnation, showing year on year the exact same figure of 1.8% from last July to now with Month on Month from June to July a negative reading of 0.1%, down from 0.3% in June. Not good news for the FED who are banking on (no pun intended), good statistics to be released in the coming months to support a rates rise towards the end of the year.

    Verdict:- In short, why is the gold price rising? China. The shock devaluation following poor data really caused ripples throughout the markets. This coupled with worse-than-expected results in US CPI data, has meant the gold price has had a spring in its step and causing greater headaches for Yellen and the FED going forward.

    Article by Michael Cooper

    email:-michaelc@atsbullion.com

     

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  7. Why is the gold price dropping?

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    Why is the gold price dropping? – Gold Price at 5 year Low


    The last couple of weeks has seen huge change in the gold price. It is one of the biggest movements in the gold market since the drop in 2012. But not in terms of the price. What I mean by this is the following: we have seen price drops of this sort before in the last couple of years. In April/May 2013 we saw the price move from £1000 to almost £900. In the June/July of the same year we saw a price drop from around £930 to about £820.

    As someone that sits and watches the market day in and day out, I can tell you, we aren’t in unfamiliar territory at all. Naturally with all fluctuations there are reasons attributed to such volatility, whether it be a better-than-expected economic data announcement, perhaps a ceasefire in a war zone or even a fellow commodity tanking, for example the oil price. There is always something that puts pressure or lifts the gold price depending on how it is received. Gold is one of the only asset classes available that is a true receptacle of world events. It is probably the last one. It is a mercurial commodity, not only in composition, but in its ability to adapt and act out world incidents on the grand stage.

    Chinese Gold Dragon

    Chinese Gold Sell-off

    So why is the gold price dropping?


    The gold price drop in the last week or so is down to the following:

    China

    The big news of course this week was about China. On Monday, minutes after the Shanghai gold exchange opened, the gold price plummeted after heavy selling of the commodity. An estimated 33 tonnes of gold were dumped causing a huge slump. This coupled with a holiday in the Japanese market, meant only an increase in the falling price with no counter-weight of a local market. Naturally the rout in the price was exacerbated by stop-loss selling and high-frequency trading. In other news, China IMF – Chinese Reserves Data which in the last 6 years have increased by 604 tonnes and have been an active player in the gold market. It seems prudent for this writer not to draw any conclusions from the coincidence of these pieces of news!

    Federal Bank Reserve

    Yellen notably in the FOMC minutes has erred on the shy side when citing a rates rise. The FBR know of the importance of such an announcement and have tended to skirt the subject of the rise so as not to cause major disruption to world markets. But the suggestion has always been there. Despite IMF reservation about such an interest rise this year, FRB: Full Transcript of Testimony last week intimated a likely rise by the end of 2015, based on a number of factors such as: a strengthening labor market (US spelling), a necessity to watch a strengthening dollar and to start an interest rates rise early, to give way to a gradual rates rise with a potential for a historically low interest increase.

    Greece

    After all the news and uncertainty that has been lingering for well over a year it would appear that Greece and it’s impending implosion is resolved. With agreements and debt structuring finally underway – all is well – at least for the mean time anyway.

    Verdict: – Why is the gold price dropping? Pressure from the dollar and the impending rates rise, the coincidence of a Chinese sell-off and its increasing gold reserves and finally a resolution of the Greek problem has led to a gold suppression. But no matter the reasons, there still seems like something afoot to me – let’s hope the Chinese government haven’t picked up on the article.

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    Article by Michael Cooper

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