Gold price falls as economic reports prop up European stocks

on Oct 23, 2014
Updated: Oct 21, 2019
Listen, Thursday, October 23: The price of gold in trading so far today has fallen for a second straight day, as signs of economic growth in Europe lift stock markets, in turn curbing demand for the precious metal.

Gold for immediate delivery was down 0.5 percent, or $6.18, at $1,234.88 per ounce as of 13:43 BST, extending yesterday’s nearly 0.6 percent decline. The gold price has again fallen below the 50-day simple moving average, after managing on Monday to break above the measure for the first time since August.
European stocks ticked higher after data earlier in the day showed Eurozone businesses were fairing better than expected so far this month. The German Flash Manufacturing PMI rose to 51.8 in October from a final reading of 49.9 in the prior month, while the composite Eurozone Flash Manufacturing PMI came in at 50.7 from September’s 50.3.

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“We are in this phase when the markets are closely watching the economic backdrop and the actions of central banks,” observed Carsten Menke, an analyst at Julius Baer, as cited by Reuters.
Menke added that any signs of improvement in the backdrop “should be positive for the equity markets, because it points towards a supportive business environment, while it should further weigh on safe-haven demand for gold and reduce investors’ willingness to pay for gold as insurance”.

On the COMEX in New York today, gold for December delivery had fallen eight dollars, or 0.6 percent, to $1,241.7 per ounce as of 14:10 BST. A drop in holdings in the SPDR Gold Trust, the world’s biggest gold-backed exchange-traded fund (ETF), afforded further evidence that investment appetite for bullion was softening.

Holdings in the ETF fell 0.3 percent to 749.87 tonnes yesterday, the lowest level since late 2008. Outflows from the fund this week have now surpassed 11 tonnes, the most in any week since mid-September.
Reuters quoted Natixis analyst Bernard Dahdah as saying that there were still outflows from physically backed gold funds, and that “since the beginning of the year we’ve had 90 tonnes”. Dahdah added that western investors were “still not terribly excited about holding gold.”
“Without seeing a pickup in ETP holdings, the near-term outlook still looks like one where the price action will be driven by short-term speculative and technical decisions,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in a report cited by Bloomberg.


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