End-of-week top gold news

Friday, 27-Mar-2015

Lydia Mulvany (Bloomberg) Yellen Gives Gold Bulls Biggest Rally on Rates Since January “Janet Yellen gave gold bulls a gift when she signaled policy makers aren’t rushing to raise interest rates. Gold had its biggest weekly gain in two months on the prospect that U.S. rates will stay lower for longer.”

Note: Gold had a good week last week and was able to add to gains this week amid ongoing reallocations associated with a more dovish than expected Fed.

Izabella Kaminska (FTAlphaville) Is the Fed bluffing on rate hikes? “It might not be polite to say it overtly, but concerns are growing that the Fed’s rate hiking promises may be nothing more than a big bluff. The vogue for doubting Fed rhetoric started in earnest on March 11, when Ray Dalio, founder of hedge fund firm Bridgewater Associates, wrote to investors that there was a risk if the Fed raised rates too fast it could create a market rout similar to that of 1937.”

Note: My doubts about a Fed rate hike stretch back considerably further than March 11. I was en vogue early!

Tommy Stubbington (Wall Street Journal) Torrent of Cash Exits Eurozone “A wave of cash is leaving the eurozone, where returns on safe assets are infinitesimal, if they are positive at all, and headed to the U.S. and other refuges such as Denmark and Switzerland.”

Note: Though the WSJ doesn’t mention it specifically, there is ample evidence to suggest that some of those outflows are going into gold.

Kooz Jansen (BullionStar) Indian Gold Import Exploding In March “March has not even ended, though preliminary data indicates India has already imported over 130 tonnes of gold this month. A conservative estimate suggests total gross import can reach 150 tonnes of gold this month.”

Note: That’s an impressive number, especially when you consider all the duties and restrictions that remain in place.

Ira Iosebashvili (Wall Street Journal) Gold Prices Hit Three-Week High on Interest-Rate Expectations “Gold prices rose to their highest level in three weeks on Wednesday, as weak U.S. data bolstered the argument the Federal Reserve would likely take its time before raising interest rates.”

Note: Durable goods orders tumbled in February, missing expectations by a wide margin and prompting negative revisions to GDP forecasts.

Debarati Roy & Eddie Van Der Walt (Bloomberg) Gold Rallies for 7th Day as Yemen Turmoil Boosts Precious Metals “Gold headed for its longest run of gains in more than two years as Saudi Arabia and its allies started bombing targets in Yemen, boosting demand for a haven.”

Note: Military action in Yemen added to already high geopolitical tensions, promoting safe-haven flows into gold.

Juan Carlos Artigas (World Gold Council) Gold in a rising dollar environment “Generally, there is an inverse correlation between gold and the dollar. However, our analysis shows that the gold price increases more when the dollar weakens than it falls when the dollar strengthens. In our view, the dollar’s relationship with gold has changed dramatically over the past decades and is likely to shift further as demand moves East and the world moves to a multicurrency system.”

Note: We noted repeatedly throughout the recent dollar rally that gold was proving remarkably resilient. As the dollar index set new 12-year highs, the yellow metal wasn’t even able to get below last November’s low. As for the move to a “multicurrency system”; that’s a polite way of reminding us that the dollar is falling out of favor a s the sole global reserve currency.

(Reuters) China should boost gold reserves to 5 pct, says World Gold Council “China should increase its gold holdings to around 5 percent of its total foreign exchange reserves to help diversify currency risks, the World Gold Council (WGC) said. China currently holds about 1.6 percent of its foreign exchange reserves in gold, which is relatively low compared with developed countries and some developing countries, WGC China managing director Roland Wang said.”

Note: I don’t think China particularly needed the nod from the WGC to continue their voracious accumulation of gold as a reserve asset. Everyone is pretty aware that China has been building reserves consistently since they surprised the world in 2009 by announcing they had accumulated 1054 tonnes of gold. Their efforts are likely to continue for some time to come.