Gold starts 2014 with more ETF outflows

The gold price was doing very well at the beginning of the week. Like the rest of us it had decided to go on a full blown detox and try and rid itself of the effects of paper market toxicity. Alas it rolled off the wagon on Tuesday. Once this happened it was vulnerable to the speculation surrounding not only the FOMC minutes but also the outcomes of the ECB and BOE meetings and US economic data.

The FOMC minutes had little impact on the gold price. Given the announcement of $10 bn tapering last month and the press conference given by Bernanke immediately following his final committee meeting, no surprises were expected from the most powerful central bank in the world.

The minutes merely showed that there is an ongoing concern with the declining impact of the QE program.

Instead the ADP’s private sector jobs report had a greater impact on the price of gold, sending it to a one week low.

Non-farm day

Tomorrow all eyes will be on the Labor Department’s employment report and its key non-farm payrolls figure. General consensus seems to be that around 200,000 jobs were added in December. A figure widely off the mark will likely impact the marker. A noticeably lower number will be positive for the gold price. However a lower number is unlikely.

Comex activity

Last week the number of open Comex gold positions rose. Many believe this reflected new longs in the market, most of which have been closed following profit taking according to UBS. “Comex data shows that gold open interest increased slightly between Dec. 31 and Jan. 7 – these probably reflect some tentative longs building only to bail ahead of the release of the December FOMC (U.S. Federal Open Market Committee) meeting minutes yesterday and the employment report due this Friday.”

ETF withdrawals begin

The SPDR Gold Trust, the largest gold ETF reported its first withdrawal of the year yesterday, of 1.5 tonnes. Having experienced outflows of 550 tonnes last year, the fund now stands at a five-year low of 793.121 tonnes.

Royal Mint runs dry

Big news in the gold market yesterday, and still seems to be making the rounds, is the announcement that the UK Royal Mint ran out of the new 2014 sovereign just two days after release. From the website, it is clear that the Mint had intended to sell 7,500 coins. In an email the Royal Mint explained, ‘Since the dip in the price of gold, we have seen increased demand for our gold bullion coins from the major coin markets, and this presently shows no sign of abating…The Royal Mint continues to supply to its customers and is increasing production to accommodate the higher demand.’

Central bank meetings

Earlier on today both the ECB and BOE met for their monthly monetary policy committee meetings. Both decided to maintain rates of 0.25% and 0.5% respectively.

Mark Carney declined to give any further guidance as to when the MPC may decide to increase rates. Whilst a target of 7% unemployment has been mentioned, the Governor has previously stressed that reaching this level does not necessarily mean that monetary policy will tighten immediately.

Draghi told a press conference that the rates would “remain at present or lower levels for an extended period of time”.

About the Author

Jan Skoyles is Head of Research at The Real Asset Company, a platform for secure and efficient gold investment.