Gold Price "Back in Doldrums" But Holds Best Euro Gains in 6 Years as US GDP Slows, Eurozone Inflation Sinks, GLD Stockholders "Believe in Bull Run"
GOLD PRICES slipped in London trade Friday, nearing yesterday's 2-week lows after new US data showed a big slowdown in GDP growth but stronger-than-expected household spending. January still saw gold's biggest Dollar-price rise in almost a year near 7%, plus the biggest Sterling gain since the rebound of July 2013 and the fastest Euro-price rise since January 2009. Silver meantime held below $17 per ounce, halving January's previous gains this week to 8%. European stock markets also fell Friday, but stayed on track for their strongest January since 1989 according to Bloomberg data following this month's announcement of Eurozone QE from the European Central Bank. "Sure enough we have seen gold and silver revert to form," writes David Govett at the London office of brokers Marex Spectron, saying the metals "promised a lot and delivered little. "For the time being at least, the worst is over. [But] I won’t be holding my breath for a recovery...We will remain in the doldrums." "Thursday's retreat has been a major disappointment to our recent upbeat view," says analyst Edward Meir at US brokerage INTL FCStone. Predicting that the US Fed will either delay its first rate hike, or wait a considerable time after before raising again, "We would rather still want to be long at this stage of the game – much as it hurts," Meir says. Today's US data said GDP growth slowed to 2.6% annually in the fourth quarter of 2014, missing analyst forecasts of 3.3% and with domestic price inflation slowing to 1.1%, just ahead of inflation's four-year low at the end of 2013. Personal consumption spending between October and December 2014, adjusted for inflation, rose 2.8% annually, matching end-2013's three-year high. New Eurozone data earlier put the rate of inflation across the 19-nation currency union at minus 0.6% in January from a year before, matching the record low of late 2009. The Bank of Russia, which bought record quantities of gold for its reserves in 2014 according to the Financial Times today, meantime cut its key interest rate from 17% to 15%, saying that inflation – driven by late 2014's Ruble crash – "will be contained by a decrease in economic activity." The Ruble spiked lower near 72 per Dollar, but held some 10% above December's new all-time lows. "With 20/20 hindsight [yesterday's] long liquidation [in gold and silver] was no surprise, especially ahead of end-month/end of week," says a note from Standard Bank's commodity dealers, pointing to this month's Swiss Franc chaos, Greek elections and Eurozone QE. Investors "now see the world is not over yet." But exchange-traded trust fund shareholders "remain believers in the bull run," Standard adds. Cash inflows to the giant SPDR Gold Trust (NYSEAcra:GLD) have seen it buy $1.9 billion of gold this month to back newly created shares this month, the largest GLD investment since October 2012. Gold prices in Shanghai meantime "traded at a discount through most of [Friday]" to London quotes, according to one Asian dealing desk, suggesting weak demand and ample supply in China – the world's second-heaviest gold buying nation. Over in world No.1 India, "Most investors and buyers of jewellery expect import duty on gold to be cut from 10%" in the forthcoming government budget, unveiled a month from now, reckons Mumbaia refinery Penta Gold's Ketan Shroff, quoted by the Economic Times. The hike to 10% duty – widely blamed for a surge in gold smuggling to India - came in 2013 as the then-Congress Party government also imposed tight quantity controls to try and reduce the country's current account deficit with the rest of the world. That rule, known as 80:20, was unexpectedly abolished in November by the BJP government elected under prime minister Narendra Modi.