Both silver and gold slipped in London on Friday morning, edging down to $1271 per ounce and $19.80 respectively.
European equities pushed higher while the US Dollar rallied and major government bond prices rose.
US crude oil prices headed for their 3rd weekly gain on the trot, rising above $105 per barrel.
Gold cut this week’s gain to 3.9%. Silver prices held onto 4.2% week-on-week gains.
Scotia pegs near-term resistance in the gold price just above Thursday morning’s 2-week high of $1299 per ounce – hit after Federal Reserve chairman Ben Bernanke said US monetary policy will remain “highly accommodative for the foreseeable future.”
Doubting Bernanke’s assurances, however, “You have to be a brave man or woman to hold gold into a Fed tightening cycle and a Dollar rally,” writes The Daily Telegraph‘s international business editor Ambrose Evans-Pritchard.
“My guess is that the Fed will indeed to have to retreat from [tapering] QE in the end, just as it had to back away from premature tightening after QE1 and QE2.
“But we are not there yet, and they will take longer to blink this time.”
A new report from ANZ Bank agrees, saying that the gold price is likely to fall further short term because “volatility remains high, and the drivers that have seen gold drop 25% so far this year remain in place.”
“With many [gold] investors remaining trapped in a falling market,” says the latest Commodities Weekly from French investment bank and bullion dealers Natixis, “there may be more rounds of bloodletting to go before some degree of sanity returns.”
Natixis commodities analyst Nic Brown now expects “that the price of gold will drop slightly lower over the remainder of the year [before] the gradual return of net investment demand offers increasing support” in 2014 but the average annual price drops to $1200 per ounce.
Over in Turkey, a strike by workers at the Turkish State Mint – reputedly the world’s heaviest producer of gold bullion coins between 2000 and 2010 – has crimped supply and started to push local gold prices higher, according to Hurriyet Daily.
In wholesale trading, “idiosyncratic factors to do with supply are driving up lease rates, and driving up the gold price at the moment,” said Roubini Global Economics analyst Gary Clark to CNBC yesterday.
“But we haven’t seen a rise in tail risk, so that rally should not be sustained.”
Yesterday in Frankfurt, European Central Bank president Mario Draghi replied to Portuguese MEP Nuno Melo asking whether Cyprus’ planned sale of some gold bullion means “other member states may be ‘obliged’ to sell their reserves?”
Most Eurozone reserve assets are now held and managed by the ECB, said Draghi. Even where the national central bank retains control of some reserves, he went on, such transactions are “above a certain limit subject to approval by the ECB in order to ensure consistency with the exchange rate and monetary policies of the Union.”
In 2009 Draghi famously rejected then Italian prime minister Berlusconi’s attempt to tax Italy’s national gold reserves – the world’s third largest – when head of the Banca d’Italia.
Over in China meantime, stock markets closed lower as new data showed a surge in consumer credit but a slowdown in money-supply growth.
Early Monday morning will bring China’s second-quarter GDP data, notes Marc Ground at Standard Bank – “generally not as important” for the gold price as for industrial commodities, but “Asian physical buying (particularly from China) has provided a crucial crutch for gold amid Fed tapering concerns.”
Adrian Ash | BullionVault