Gold Market Update – May 2014
Tensions between the Ukraine and Russia have been less disruptive than a month ago, reducing market volatility and bringing down gold’s risk premium –allowing gold markets to refocus attention on macroeconomic drivers. Reasonably positive economic data out of the US.
- Tensions between the Ukraine and Russia have been less disruptive than a month ago, reducing market volatility and bringing down gold’s risk premium –allowing gold markets to refocus attention on macroeconomic drivers.
- Reasonably positive economic data out of the US, and some recent good company results, have helped US and global equity prices rally. Similarly, the US Fed’s QE tapering is largely unfolding as expected, putting aside recent falls in bond yields, while relatively benign inflation pressures are limiting demand for gold as an inflation hedge.
- This has all weighed heavily on investor demand for the shiny metal. Exchange traded fund (ETF) holdings of gold have again started to decline, having experienced a period of stabilisation since around the start of the year. Net-long positions in gold are also down from recent peaks.
- Physical demand indicators are also a little softer, contributing to a rise in Comexgold inventories. Chinese net imports of gold from Hong Kong have fallen 40% from their most recent peak in February, and are 50% below last year’s all time high.
- Consequently, after remaining relatively trade bound for much ofthe past month, gold prices dropped almost 4% since the end of May to around US$1,245 per ounce.
- Aside from the geopolitical risks, a potential unwinding of India’s gold import restrictions, post the recent election, poses a significant upside risk to gold prices. Some measures have already been relaxed and should help to ease elevated gold premiums in India, although the impact on exchange prices has so far been limited. Gold Market Update –May 2014
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About the Author
James joined NAB early in 2011 from the Reserve Bank of Australia where he worked for four years. He was involved in analysis of overseas economies and commodities, as well as business investment and residential property within Australia.
Before this, James taught economics at the University of Western Sydney, and was employed as an economic forecaster with Integral Energy.
He graduated from the University of Western Sydney (with first class honours in Economics) and was a recipient of the Honours Economic Society Award (HESA) in 2006. James also holds a Bachelors degree in Law.
At NAB, James is responsible for monitoring and forecasting the emerging Asian economies with a particular emphasis on China, and is also a member of the commodities team.
