(Kitco News) - Gold prices continue to defy U.S. dollar strength as investors look for safe-haven assets, but opinions are mixed as to what its gains in foreign currencies means for the U.S. marketplace.
Analysts have pointed out that Thursday was almost a game-changer for safe-haven assets after the Swiss National Bank’s unexpected announcement that it dropped its currency peg against the euro, and dropped its deposit rate to negative 0.75%.
Some analysts have noted that gold’s performance against other currencies is helping it to hold gains against the greenback. In a recent interview, Colin Cieszynski, senior market analyst at CMC Markets, said that he would expect gains in gold/EUR to help support the U.S. market.
Gold priced in euro has outperformed the U.S. gold market, with the gold/EUR spot price breaking above a key technical level of €1,050 an ounce.
The SNB news shook already fragile European markets, and created significant momentum for gold/EUR, which is trading at its highest point since May 2013. Currently, gold/EUR is trading at €1,088.85 an ounce, up almost 4.5% on the day.
Interestingly, the SNB announcement caused a significant decline in gold priced in Swiss francs. On Wednesday, gold/CHF was trading at its highest point since September 2013, and now it is down more than 9% trading at CHF36,349 an ounce.
Gold priced in the British pound rose to its highest level since March, hitting a session high of €834.55 an ounce, Thursday. Currently, gold/GBP is trading at €832.55 an ounce.
Gold priced in the British pound rose to its highest level since March, hitting a session high of €834.55 an ounce, Thursday. Currently, gold/GBP is trading at €832.55 an ounce.
Surprisingly, gold in Chinese markets has not seen as strong a performance as the European region. Gold priced in Chinese yuan reached a four-month high Thursday at CNY7,833 an ounce. However, gold priced in Japanese yen hit ¥148,152 an ounce, its highest level since March 2013.
Gold priced in India rupees is lackluster, compared to euro-regional currencies, hitting INR78,590.90 an ounce, its highest point since August.
Of course not all analysts are convinced that gold in other currencies is significant to the dominant U.S. marketplace.
“Yes, gold is going up against the euro but banana’s also went up against the euro,” said Julian Jessop, head of commodity strategy at Capital Economics. “I don’t think it is helpful to look at gold in anything but in U.S. dollar terms. All non-European-based assets went up against the euro last year because of its weak currency. That doesn’t really tell you anything about the gold market.”
Bart Melek, head of commodity strategy at TD Securities, said the performance of gold against the euro is an indication that demand for the yellow metal is strong in Europe but he agreed, looking at it from a currency perspective, is not helpful.
Melek added that lower government bond yields, and not a weaker currency, have made gold a more attractive investment in Europe.
German five-year government bond yields have recently been hovering around negative territory, which means people are paying the government for the security of holding government debt.
“Opportunity costs for holding gold in terms of fixed income markets have fallen lower and that makes a strong case for holding gold,” he said. “Gold may not be generating a yield but it makes sense to hold it if you think the price is going to appreciate.”
By Neils Christensen of Kitco News; nchristensen@kitco.com
No comments:
Post a Comment