FT: US GOLD - Gold reclaims risk asset mantle, tracks equities, dollar
By Tom Jennemann, Correspondent tom.jennemann@fastmarkets.com 973-204-3383
New York 22/06/2012 - Gold futures languished around $1,565 an ounce Friday after a seemingly brief re-establishment of perceived safe-haven status came to a screeching halt this week.
Meanwhile, money floods into the US dollar while global deflationary pressures intensify, both of which have pulled the precious metals complex downward.
Gold for August delivery on the Comex division of the New York Mercantile Exchange was last down 40 cents at $1,565.40 an ounce, but today's stability comes a little solace after a $50.30, or 3.1 percent, pull-back on Thursday.
“It's pretty obvious that people misinterpreted what happened with gold from the beginning of June until Wednesday afternoon. A lot of ink was spent talking about how gold returned to its safe-haven roots in the lead up to the Greek elections. That wasn't the case,” a US-based gold trader said.
“It's clear to us, that the climb from $1,530 to $1,640 was nothing more than a QE play. When the [disappointing US non-farm] jobs numbers were released [on June 1] traders began to price in the assumption that QE3 was going to happen at this week's [FOMC] meeting. When that didn't happen, positions were sold and now we are heading back to May's $1,530 level,” said the trader, who added that gold once again is behaving as risk asset and should move in lock-step with dollar and equities for the next several weeks.
In the wider-markets, the dollar is holding its gains at 1.2555 against the euro, a level that's nearly two cents higher than on Monday, while the US equity market opened modestly stronger after dropping nearly two percent yesterday.
In news, Moody’s Investors Service Thursday evening cut the ratings on 15 of the world's biggest banks, with most receiving either one-notch or two-notch downgrades.
“All of the banks affected by today’s actions have significant exposure to the volatility and risk of outsized losses inherent to capital markets activities,” Moody’s Global Banking Managing Director Greg Bauer, said in a statement.
These downgrades come in the wake of a number of macroeconomic data reports that point to a slowdown in the economies in China, Europe and the US.
Eurozone flash manufacturing PMI fell to 44.8 in June from 45.1 the previous month - a three year low.
The HSBC Chinese flash PMI index came in at 48 in June, which marks the eighth straight month of contraction.
In US data, existing home sales for May came in at 4.55 million, down against the expected 4.58 million, while the Philly Fed manufacturing index was well below the expected 0.7 at -16.6 - the lowest levels since last August.
“The market was reacting to the weaker economic growth data, and the likelihood of deflation, which would hurt gold price,” London based precious metals trader Sharps Pixley said in a note.
The next potential trigger to drive gold prices higher may be how US fiscal policymakers and politicians intend to deal with the "fiscal cliff" in early 2013, which leaves gold in the hands of the physical market in the near term, Barclays Capital said in a note.
“Buying has shown signs of life in China with volumes on the Shanghai Gold Exchange once again rising above the monthly and annual average but appetite in India remains soft in light of the weak rupee and Reuters cited dealers were holding off in anticipation of lower prices,” BarCap said.
This sentiment was echoed by Standard Bank, which said that overall tepid physical demand in India has been a point of weakness for the precious metals markets.
“For a while already we’ve seen weak Indian buying owing to a weaker rupee and the usual seasonal decline we observe over this period. South East Asian players have been doing well at picking up the slack but of late they have not,” the bank analysts said.
As for the other precious metals, Comex silver for July delivery was down 7.9 cents at $26.760 an ounce. Trade has ranged from $26.565 to $26.995.
Platinum futures for July delivery on the Nymex was down $2.50 at $1,436.10 an ounce, while the September palladium contract was at $609.40 an ounce, up 85 cents.
