Daily Nugget: Gold Hits Highest Price In A Month On Weak Dollar

The gold price reached its highest in a month earlier today thanks to a relatively weak US dollar, following the surprisingly low US jobs data on Friday. Silver, platinum and palladium also climbed in price.

As prices rallied to $1,250.06/oz physical demand in China reportedly fell back slightly. Premiums on the Shanghai Gold Exchange fell overnight from Friday’s $18 to $17 this morning.

Outflows in the gold SPDR Trust have slowed, this has also helped to support prices.

Also last week, for the second week in a row, data showed that net long positions in gold futures and options held by money managers and hedge funds, were increased.

December’s non-farm payroll data, released on Friday, took market participants by surprise when it showed employers had taken on the lowest amount of workers in nearly 3 years. The low number may prompt FOMC members to exercise caution over future tapering plans. Previously, good non-farm data had been seen as a reason for tapering to go ahead. Despite the poor non-farm data, the unemployment rate fell to 6.7% as more people left the labour force.

It will be interesting to see whether or not gold continues its upward momentum this week as it tries to break through the $1,250/oz resistance. More volume is needed in order to drive the price upwards however and therefore it is likely that the price will trade sideways over the next few days. If gold goes much above $1,250 then it is likely to prompt short-covering by those who rode out the weaker prices of 2013.

New gold demand in Middle East
Gulfnews.com reported over the weekend on a new demographic that has entered the gold market, ‘the (non-GCC) Arab’. According to the news-site, there has been a spike in demand from Syrians, Iranians and Egyptians, in recent weeks for gold and jewellery relates purchases. The article quotes, Shamlal Ahmad, director of international operations at Malabar Gold, “The impression is that these shoppers are buying into gold as a sort of defensive asset against social or economic uncertainties in their home countries.”

Gold coins reflect true demand
In other news, the first US-struck gold coin, the Brasher Doubloon, sold at auction yesterday for $4.58 million. The coin, 89% gold, 6% silver and 3% copper, was struck in 1787 by George Washington’s silversmith neighbour Ephraim Brasher. The sale price set a new record for these historic coins.

Speaking of historical US coins, 2013 was a record year for coins sold at a price of $1 million or more. This does not include numismatic bullion coins or the modern coins sold by the US Mint. “The prices realized for U.S. coins at public auctions this past year totalled nearly $393 million, the highest aggregate total anyone can recall,” Terry Hanlon, PNG president is quoted as saying on antiquetrader.com.

The week ahead
Key things to look out for this week include US and UK retail sales, UK inflation and industrial output data for the Eurozone.

Inflation in the UK is likely to be reported at or near the target 2.0%. The target has not been met since late-2009. In November 2013, inflation fell to a four-year low of 2.1%, the disappointing economic performance in December may well mean that the latest reading brings us to target.

Industrial output is likely to show some improvement in the Eurozone, this will not come as a surprise given the high performing PMI in recent months.