Daily Nugget: Gold Demand Remains Sluggish; The Odyssey Continues

The gold price continues to tread water ahead of today’s ECB meeting and tomorrow’s US non-farm payroll (NFP) data release.

The ECB meeting today, is widely expected to result in new monetary stimulus measures announced, given the recent strengthening in the euro. Consensus seems to be that the refinancing rate will be cut by 10 to 15 basis points, whilst the deposit rate will be criminally cut to below zero, giving a negative return on depositors’ money. Draghi is also likely to leave the door open for quantitative easing and asset purchases later in the year.

Given the strength of the US dollar index (which hit a two-month high this week) it is likely that the market has already accounted for the announcement of further stimulus measures in the EU and so we may see little reaction in the precious metals. However, look out for how both the euro and US dollar react to any ECB announcement today.

Before the COMEX close yesterday, gold did jump slightly in response to the low ADP national employment report. The ADP report is often seen as an indicator to the non-farm payroll and has been fairly accurate recently The latter is expected to show 215,000 new jobs were added in May, the ADP report fell short of this, showing just 179,000. The ADP’s indication that NFP could be slightly on the downside suggests that there will be a bullish reaction from both the gold and silver price.

Clearing statistics released yesterday by the LBMA showed the average value of gold transfers was relatively unchanged at $25.4 billion for the month of April. However the amount of gold transferred between LBMA member accounts climbed by 3.2% compared to the previous month. This, combined with the lower gold price, meant that there was little change in the average value of gold transfers. A total of 19.6 million ounces of gold were transferred daily, a drop from the same period last year. In contrast, there was a 6% fall in the number of silver transfers compared to the previous month.

Two banks released interesting comments in regard to the gold market yesterday. SocGen (MILAN:GLE) upwardly adjusted their gold price forecast citing support from the crisis in Crimea. They increased it o $1,272 from $1,180. HSBC's (NYSE:HSBC) note pointed towards weak physical gold demand and cited Turkey’s low gold imports and India’s low demand given import restrictions and a weak rupee.

An article on Bloomberg yesterday said that gold investors were becoming bored by the lack of volatility in the gold price. As this is supposed to be a market update, I won’t have my rant right now, but I’d be interested to hear your thoughts on this either in the comments below or using our Gold Silver Bugs Community.

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Odyssey Marine Exploration Inc. (NASDAQ:OMEX), continues to defy expectations in its recovery of the site of the SS Central America. When the recovery began in March, there were many naysayers who believed that after the two tonnes of gold recovered in the early 1990s, from the site, there was nothing else to be recovered. The team have proved the haters wrong and in their first reconnaissance dive to the wreck, recovered over 1,000 ounces of gold. The findings around and within the ship are a great example of the vast wealth and demand for gold during the California gold rush.

Written By: The Real Asset Company