28 Apr 2014
Gold clings to USD1,300/oz level after support from Ukraine tensions
FXStreet (London) - Gold prices are clinging to the USD1,300/oz mark, after being supported by haven demand on concerns over the Ukraine.
The recent rally in the precious metal ended a four-week decline. Gold had climbed to a six-month high in March at USD1,380 on Russian military incursions into the Crimea. In the interim, gold prices declined by 9 percent on hopes that tensions would ease in the area.
Gold remains up 8.1 percent on the year-to-date, but follows a 28 percent decline in 2013, the biggest decline since 1981.
However, there are signs that the rally in gold may be short-lived.
Decline of indiscriminate Chinese demand
Data released overnight by the Hong Kong Census and Statistics Department showed that net gold inflows from Hong Kong into mainland China declined to 85.128 tonnes in March, down from 112.314 tonnes in February. The declines were driven by a weaker domestic Renminbi as well as discounted mainland gold prices reducing Hong Kong gold demand from Chinese banks. According to the World Gold Council, China consumed a record 1,066 tonnes of gold last year, overtaking India as the world’s largest gold consumer. The decline in Hong Kong gold demand suggests a slowing of indiscriminate appetite for gold from Chinese banks.
Relative US tightening
A further source of downside pressures comes from the Federal Reserve’s continuing support for the policy of QE tapering. The Fed has cut USD10bn from its asset purchase programme in successive meetings since its first round of tapering in December, with the programme currently standing at USD55bn-a-month. With a return to relatively-tighter monetary policy, investor appetite for gold as a store of value has tumbled.
Spot gold prices currently stand at USD1,299.60, clinging to support around the psychologically-important USD1,300 level.
The recent rally in the precious metal ended a four-week decline. Gold had climbed to a six-month high in March at USD1,380 on Russian military incursions into the Crimea. In the interim, gold prices declined by 9 percent on hopes that tensions would ease in the area.
Gold remains up 8.1 percent on the year-to-date, but follows a 28 percent decline in 2013, the biggest decline since 1981.
However, there are signs that the rally in gold may be short-lived.
Decline of indiscriminate Chinese demand
Data released overnight by the Hong Kong Census and Statistics Department showed that net gold inflows from Hong Kong into mainland China declined to 85.128 tonnes in March, down from 112.314 tonnes in February. The declines were driven by a weaker domestic Renminbi as well as discounted mainland gold prices reducing Hong Kong gold demand from Chinese banks. According to the World Gold Council, China consumed a record 1,066 tonnes of gold last year, overtaking India as the world’s largest gold consumer. The decline in Hong Kong gold demand suggests a slowing of indiscriminate appetite for gold from Chinese banks.
Relative US tightening
A further source of downside pressures comes from the Federal Reserve’s continuing support for the policy of QE tapering. The Fed has cut USD10bn from its asset purchase programme in successive meetings since its first round of tapering in December, with the programme currently standing at USD55bn-a-month. With a return to relatively-tighter monetary policy, investor appetite for gold as a store of value has tumbled.
Spot gold prices currently stand at USD1,299.60, clinging to support around the psychologically-important USD1,300 level.