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11.03.2015 16:20

Gold: а review of the market situation

Gold prices dropped significantly today, while reaching the lowest level in more than three months, due to the ongoing strengthening of the dollar and expectations of an earlier interest rate increase by the US Federal Reserve. It is worth emphasizing the precious metal may go down even more if the US stock indices and bond yields continue to rise.

Experts note that the Fed could start raising rates in the middle of this year (probably in June), and investors are preparing for the Fed next week to find out if he has not given up his intention to be patient regarding the timing recovery rates. Expectations of an increase of interest on loans have a negative impact on the precious metal because it fails to compete with earning assets during the period of rising rates.

Pressure on prices also has increasing European stock markets after a marked decline in the previous session.

Meanwhile, recent data by Bloomberg showed that the assets of exchange traded funds that invest in gold, fell to its lowest level in the last month and a half. By the closing bell Tuesday they dropped to 6.5 tons - up to 1653 tons. This is the lowest figure since January 26. Within two weeks of continuous decline fund assets fell by 27 tons. The main outflow of clients' funds fell on the world's largest exchange-traded fund SPDR Gold Trust, whose assets have declined over the two weeks of 18.2 tons to 753 tons.

Small effect has also statistics on China. As previously reported, the volume of industrial production grew by + 6.8% compared to the same period last year, after rising 7.9% in December. Industrial production growth was below economists' forecasts (+ 7.6%). Investments in fixed assets in urban China in January-February compared to the same period last year increased by 13.9%. Thus, the growth of this important indicator of activity in the construction sector fell short of economists' forecast was 15.1%. Growth in retail sales in January-February compared to the same period last year was 10.7%, slowing down against the annual growth in December at 11.9%. The forecast for January and February was + 11.5%. Weaker-than-expected data highlighted concerns about the Chinese economy, reviving speculation that policy makers will have to resort to fresh stimulus measures.

As for the situation in the physical market, the decline in prices to a minimum of three little increased demand for the precious metal from Asian buyers. Prize for gold in China compared to London was about $ 5 per ounce.

April futures price of gold on the COMEX today fell to 1150.90 dollars per ounce.

Market Focus

  • U.S. commercial crude oil inventories decreased by 2.5 million barrels from the previous week
  • Canada: Retail Sales, m/m, November 0.2% (forecast 0.5%)
  • U.S.: Nonfarm Payrolls, January 227 (forecast 175)
  • Eurozone: Consumer Confidence, January -4.9
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