The daily gold price scenario – Asia takes it up, London brings it down

Lawrie Williams

Most mornings, when I log on to my computer, two of the first sites I check are www.sharpspixley.com  and www.kitco.com  to check out how the gold price is moving and what it has done overnight,  as well as hyperlinks to the latest significant items of gold news from other sources .  The former carries an excellent real-time update on the gold price, not only in US dollars, but also in a number of other relevant major currencies, while on the latter I tend to be drawn to the small thumbnail chart which shows the most recent move in the gold price in a rather exaggerated graphical format.

From this little kitco chart one does at least get an impression of the way the gold price has been trending overnight and in the opening of trade in Europe and recently an interesting trend has become apparent.  Almost every day recently, almost without exception, the Asian markets have taken the gold price higher to see it taken down sharply again on European and London opening – and then the day’s trading tends to see it recovering  unless there has been some significant geopolitical or financial news which has taken it to another level either up or down.  But the pattern of the overnight price being held or rising followed by the sharp take down on the London market as soon as trading opens, has been very apparent of late.  It was apparent again today, but was followed by a decent price recovery taking gold back to above $1190 ahead of New York opening.

While I’m not sure how significant this all is, I do see the overnight Asian strength – even if at the moment it’s only mildly positive, as encouraging for the long term gold price, while the London morning movement does smack of the same slightly bearish forces at work ahead of the new LBMA gold price benchmarking process.  But one should also point out that although the initial London movement has tended to be down – by perhaps a few dollars – there has also tended to be a small pick up as the day progresses and this seems to continue in New York unless something like the next statement (however inconclusive) from Janet Yellen or one or other of the various FOMC participants on a somewhat nebulous interest rate raising timetable moves the price a little more sharply up or, usually, down.

It was thus interesting to listen to Nikos Kavalis of Metals Focus’ views on the longer term likely effect of Fed interest rate raising when it actually occurs at the launch of the consultancy’s Gold Focus publication yesterday.  As any such process of raising interest rates is likely to remain exceedingly cautious, it will still leave then in real negative territory which is positive for gold.  With the likely consequent unwinding of short positions built up in anticipation of the Fed’s rate rise thereafter, the precious metals consultancy sees this pointing to the end of the current bear cycle, and while it sees the potential for further gold price dips in Q2 and Q3, it sees a rising price from Q4 heading forward.  See: End of bear cycle for gold in 2015 – Metals Focus

 

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