Gold Price Drop Draws "Strong Physical Interest", Silver See Lowest Weekly Close in 54 Months

EDGWARE (Scrap Monster): Gold prices fell below last week's closing level Friday lunchtime in London, erasing an earlier rally as the US Dollar resumed its strong rally of the last two months.

Driving the Euro down to new 15-month lows, the Dollar rose after new data put US consumer confidence at the strongest level in more than a year.

Wall Street rose, and European equities reversed earlier losses, while commodities erased a bounce to see Brent crude oil back below $97 per barrel for a 1.5% weekly slide.

Gold prices fell below $1214 per ounce – the lowest Friday PM Fix since 20 December 2013.

Silver prices missed the earlier bounce, holding flat before slipping to record their lowest Friday benchmark price in London since 26 March 2010 at $17.54 per ounce.

At these prices, "We are seeing a strong pick up in physical interest," says one London dealing desk, "and I'm sure we are not the only ones. 

"[This] could provide some consolidation and possibly short covering into the next few weeks."

"The markets are still running short," agrees London broker Marex Spectron, also looking at the size of bearish betting against gold and silver prices from speculative traders in Comex futures and options.

"Upward blips will continue to happen as and when the Dollar pulls back."

But while Standard Bank's commodity analysts "have little doubt that significant shorts have been building in gold and silver over the past few weeks...these shorts seem quite sticky."

Short-covering rallies – driven by bearish traders closing their bets and helping push prices higher again – may "[be] met by even more selling...as evident from Wednesday's gold price, which tried to rally."

Over in Shanghai, domestic gold prices closed the day 1% higher on strong volume but still fell for the week.

The international free-trade zone's iAu9999 kilobar contract saw low trading, and the wholesale iAu995 contract – launched Thursday last week – recorded zero volume for the fifth session running.

Here in London, US financial services group Citibank yesterday became a Market Making Member of the London Bullion Market Association, quoting buy and sell prices in spot gold and silver to its 11 peers throughout the trading day.

Swiss investment bank and London market maker UBS today joined HSBC, Scotia Mocatta and Mitsui in contributing to the LBMA Silver Price – the new daily dealing and pricing process which replaced the century-old Silver Fix in August, and is set for legal UK oversight together with 7 other wholesale financial "benchmarks".

Courtesy: www.bullionvault.com