Gold has been trading near a six-week low this morning and is set for its first monthly decline since the beginning of the year. On Friday the gold price fell to $1,285.34, a six-week low.
Since mid-March gold has touched a six-month high to a now six-week low. This recent volatility in the gold price has apparently put off Asian investors. According to Bloomberg the price of gold for immediate delivery on the Shanghai Gold Exchange is at its cheapest, compared to London since 2012; '$1.40 an ounce below the price in London on a monthly average basis.'
This week all eyes will be on the non-farm payrolls data, released at the end of the week. February’s number was below predicted numbers, with much of this blamed on the weather. Recent economic data has been strong, with many economists believing that the economy has begun to recover from the severe weather conditions seen at the beginning of the year.
Some of gold’s fall has been attributed to Janet Yellen’s comments earlier this month that interest rates may rise in the first half of 2015. Gold and interest rates are frequently seen as negatively correlated; low-interest rates raise the attractiveness, and lower the opportunity cost, of investing in gold. Should interest rates rise, the attraction of holding interest-yielding assets increases.
Asia’s gold demand
Some of the fall in Chinese demand, and therefore the price, may be down to the lack of appeal in using gold as collateral in trade-financing deals, according to Bloomberg.
One place where demand has not slowed in Asia is Japan. Thanks to an increase in sales tax from 5% to 8%. This increase, whilst controversial, has led to many investors buying gold as they look to buy prior to the rise to then gain 3% when they come to sell after the tax change.
This morning India’s Finance Minister P. Chidambaram told a news conference that gold controls will be reviewed. In the last couple of years restrictions on gold imports have continued to increase, leading to the current, so-called 80/20 rule. Levels of smuggling have also climbed, with several tonnes estimated being brought in illegally each month.
The price of platinum, compared to its more precious contemporaries, has performed well in the last week climbing by 1% thanks to ongoing industrial action in South Africa.
California gold rush
Think the California gold-rush was something from history that we are destined to read about, rather than experience? Well, the recent drought in California means that the gold-rush is reality once again. Gizmodo reports, ‘Having found a gold lining to the West’s otherwise devastating drought, prospectors are flocking to the record-low rivers of the Sierra Nevada foothills. A mini gold rush has kicked off in previously inaccessible riverbeds, not far from the site of California’s original gold rush.’