Gold Prices Spike $10 from 2-Week Low, Commodities "Also Priced for Dovish Fed"

EDGWARE (Scrap Monster): Gold prices rose to 3-session highs above $1233 per ounce Tuesday lunchtime in London, recovering more than $10 from an overnight dip to 2-week lows as the Dollar fell following weak US data.

With the US Federal Reserve set to taper the last $15 billion of monthly QE asset purchases tomorrow, durable goods orders last month showed a 1.7% drop from August, said the US Commerce Department – the fastest drop in 2014 so far.

Some four-in-five economists polled by Bloomberg News expect the Fed to retain its promise of keeping interest rates near zero for "considerable time" in Wednesday's statement.

Sweden's Riksbank today took its key lending rate down to zero, and held its deposit rate for commercial bank reserves at minus 0.5% for the 3rd month running.

"Monetary policy is aimed at influencing people's behaviour," said Bank of Japan deputy governor Kikuo Iwata told the Tokyo parliament today

"It can't be like a train schedule," said Iwata, confirming the BoJ's commitment to QE and zero rates.

Silver rose faster than gold prices, touching near-1 week highs at $17.40 per ounce before also easing back.

"We still think commodities are pricing a dovish Fed too," says one London trading desk, noting this week's rally from new 5-year lows in broad raw materials indices.

"As a result the surprise may come to the hawkish side, relative to expectations."

Shedding 15 tonnes last week, the giant SPDR Gold Trust (NYSEArca:GLD) held yesterday at 745 tonnes of gold backing its shares – the smallest amount needed since October 2008.

Gold "remains in a downtrend," says Societe Generale analyst Robin Bhar, "but pick-up in physical buying [is] supportive."

Retail gold sales in India – the world's No.1 consumer nation until import controls were imposed 16 months ago – last week rose 20-25% from the same Dhanteras festival in 2013, reports The Asian Age from Mumbai.

Shanghai gold premiums meantime slipped Tuesday to 25 cents per ounce over London prices, suggesting weak demand and ample supply in China's wholesale market.

The strong monthly rise in Chinese gold imports through Hong Kong reported Monday "comes as no surprise," says a note from Standard Bank, "given that the SGE premium was around zero for most of July and August, then pushed up a little to $3 in September, incentivising more imports."

Year-to-date howver, "China’s gold imports still undershoot 2013 levels despite a strong start," Standard's commodities team – led by Walter de Wet – goes on.

"More broadly, we still believe it will be difficult for Asia to match the gold demand of last year – especially in Q4...[because] market expectations have adjusted to the lower gold price, and gold would need to move lower to spur demand."

Courtesy: www.bullionvault.com