Gold's price failed to top its three-day running streak yesterday and is in retreat for its second session this morning, having fallen back from a one-month high. The recent rally appears to have stalled but it may disappear should the US dollar begin to rally.
Following the disappointing non-farm payroll data released on Friday, gold had been making significant gains. However, the release of ‘good’ US retail sales data yesterday sent the price of gold below $1,250.
Yesterday, for the first time in three years, the World Bank raised its forecast for global growth. Led by the United States, the global growth expectations helped to boost equities. This morning Asian share markets were mostly higher, thanks to the upgrade.
After two days of no outflows, the SPDR Gold Trust’s (GLD) holdings fell 3.56 tonnes yesterday to 789.56 tonnes, touching a new five-year low.
Feds on tapering
Gold was also not helped by the two Fed officials who gave their tuppence worth over the tapering timeline. Philadelphia Fed President Charles Plosser and Richard Fisher, the Dallas Fed President, both offered hawkish statements on Fed policy yesterday, calling for a reduction of the Fed’s bond-buying program.
China broadens gold market reach
For the first time, China has granted licenses to two foreign banks to allow them to import gold. The licenses were granted to ANZ and HSBC late last year, however the news has only just reached the Western media.
The move is one of many measures announced in the last year aimed at opening up the world’s largest physical bullion market. It does not come as a surprise given the draft policy announcement released in September stating that more banks would be allowed to import and export gold.
ANZ and HSBC were also the first two foreign banks given permission to trade gold futures on the Shanghai Futures Exchange.
Additional to this is the news that China Everbright Bank is the tenth bank to be given permission to import gold into the mainland.
Gold mining strikes
Last year it seemed to be the platinum and palladium industry that was beset with mining issues. Today however, the Association of Mineworkers and Construction Union, the representative of about 20% of South African gold-mining employees, has threatened strike action over pay demands.
South Africa is the world’s sixth largest gold producer, so whilst supply may be affected, the strike action is unlikely to have the same level of impact experienced from the platinum/palladium mining strikes last year.
US Mint to reduce allocation
Coin demand has seemingly taken the mints of the world by surprise. Last week we were greeted with the news that the UK Royal Mint was experiencing shortages, this week it is the US Mint who is having supply problems. They have cautioned buyers that the allocation for 2014 American Silver Eagles will be sharply lower next week.