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Gold "Vulnerable" as U.S. Treasury Bond Market Sell-Off Worsens

Commodities / Gold and Silver 2012 Mar 15, 2012 - 07:49 AM GMT

By: Adrian_Ash

Commodities

Best Financial Markets Analysis ArticleThe WHOLESALE-MARKET gold price twice rose within a few cents of $1650 per ounce in London Thursday morning, adding 0.9% from yesterday's fresh 8-week low as industrial commodities ticked lower again.

The price of silver bullion rallied 2.3% to $32.40 per ounce, but remained over 5% down for the week so far, being "very much influenced" by the gold price according to one Swiss precious-metals dealer.


Japanese and Hong Kong equities rose, but European stock markets were flat while US equity futures pointed higher.

The price of US Treasury fell for the seventh consecutive session, pushing the 10-year bond's yield up to 2.29% – just shy of Wednesday's 5-month high – and extending the longest period of price falls since 2006 on Bloomberg's data.

"The [bond] market is on the back foot," reckons head strategist Charles Diebel at Lloyds Banking Group in London.

"The catalyst seemed to be the Fed acknowledging the better growth."

Analyst forecasts for today's US jobless data pointed to a further drop in the number of people claiming unemployment benefits.

US manufacturing and consumer price data – due Thursday and tomorrow respectively – were forecast to show a slight rise.

"Overall, the [gold price] looks rather vulnerable with a likelihood of testing lower levels before it resumes it upward run," says refinery and finance group MKS in its latest note.

"What seems to be surprising at these levels is lack of firm physical demand."

Over in India, however – the world's No.1 gold buying nation – "Demand has improved significantly in the past two days," Reuters quotes a Mumbai dealer.

"Prices have fallen and there is also concern about import duty hike in tomorrow's budget."

New Delhi doubled gold import duties – and handed India's domestic gold-recycling operators a strong price advantage – in January.

Despite yesterday's fresh drop in the gold price, the quantity of physical bullion held to back the SPDR Gold Trust – the world's single largest exchange-traded gold trust (ETF), now capitalized at $68 billion on the New York Stock Exchange – remained unchanged after slipping half-a-tonne Tuesday to 1293.3 tonnes.

Gold ETF holdings worldwide were unchanged Wednesday at a record high of 2409.7 tonnes, according to Bloomberg data.

Open interest in US gold futures crept 0.6% higher on Wednesday to 445,163 contracts – greater by 1.2% from a week before.

"Gold dropped bearishly [on Wednesday] through our Fibo support level," says Russell Browne at bullion bank Scotia Mocatta, pointing to another Fibonacci level – based on a number series used by some technical analysts to spot important prices – for the "the next key support level at 1625.

"A definitive close below this support level opens up a full retracement to the December low of 1522."

On the currency market Thursday morning, the US Dollar eased back from last night's rise close to a 7-week high against the Euro, which slipped near $1.30.

That held the gold price in Euros below €40,600 per kilo (€1263 per ounce).

Spain today sold €3 billion in new debt, paying 3.37% annually on 4-year debt – just less than it paid at a sale in January, despite prime minister Mariano Rajoy saying last week that Madrid will breach the newly-agreed budget deficit limit for Eurozone members.

Europe's benchmark Brent crude slipped but held near record-highs in Euro and Sterling terms.

The Reuters newswire claims that US president Obama and British prime minister Cameron yesterday discussed using emergency oil reserves to bring prices lower.

"The window for solving [Iran's nuclear program] diplomatically is shrinking," Obama told a press conference.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


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