Gold Price Jumps 4%, 'Targets $1420' as Euro Banking Crash Sends US Bonds Back to Mid-2012

EDGWARE (Scrap Monster): Gold prices shot higher yet again Thursday, surging 4.1% to hit 12-month highs near $1250 per ounce as world stock markets fell hard yet again, and the US Dollar hit fresh multi-month lows on the FX market following Fed chair Yellen's comments on delaying further interest-rate hikes.

Hong Kong's first trading day of the new Year of the Monkey earlier saw the Hang Seng index drop over 3.8%.

Shanghai's markets re-open Monday.

Crude oil meantime sank 3.5% towards new 14-year lows at $26 per barrel. Major government debt prices jumped as the cost of insuring European banks' bonds leapt, driving 10-year US Treasury yields down to their lowest since August 2012 at 1.57%.

Five-year CDS insurance on the debt of German financial giant Deutsche Bank jumped to all time record highs.

"We continue to view the [gold] market as a base from a longer term perspective," says weekly technical analysis from German bank Commerzbank, pointing to "a large falling wedge pattern which offers an upside measured target to $1450 longer term."

Short term, "One shouldn't rule out a $100 move either way," said a bullion-bank's trading note Thursday morning.

"If so, the gold selling from miners might recede – although we still see some chunky volumes trading at the [London benchmark] gold auction."

Thursday morning's LBMA Gold Price auction opened with the largest volume of sell orders in more than a week, some 70% above the daily average of Q4 2015, when gold prices stood 10% below today's level.

The size of those offers then fell – and demand rose to meet them – as the suggested price was lowered to find a balance at $1223.25 per ounce, the highest morning 'fix' since mid-May 2015.

The afternoon auction – held at 3pm London time – then drew the heaviest bid volume to buy gold for at least 3 months, totalling 2.6 times the Q4 2015 average at a price of $1241, a new 12-month high.

Gold priced in Euros meantime hit its highest level since May 2015, jumping 4.1% from last week's finish to hit €1095 per ounce – a price first seen in June 2011 amid the worsening Greek, Portugal and Ireland debt crisis.

"I believe that in the Eurozone, structurally, we are in a much better place than we were a few years ago," said Eurogroup chief Jeroen Dijsselbloem before a meeting of finance ministers from the 19-nation currency union on Thursday.

"That also goes for our banks."

Italy's prime minister and finance chief were set to complain about the new 2016 regime for so-called banking "bail ins", the Financial Times reports, describing the rules – requiring a minimum 8% write-off of a bank's unsecured creditors and larger depositors before any state aid can be given – as "an increase in instability, rather than stability."

Chinese banks may suffer losses 4 times the size of US banks' during the 2006-2011 crisis, reckons hedge-fund manager Kyle Bass, with non-performing loans threatening $3.5 trillion of equity.

London-based trust fund provider ETF Securities said Wednesday it has seen "a surge in demand" for exchange-traded products backed by gold, with inflows totaling $720 million so far in 2016.

Courtesy: www.bullionvault.com