Gold Prices Fall on Four Million Ounce Sale

Although Friday night was relatively quiet for US stock markets, there was some interesting price action in the gold market. At around 11am New York time, a four million ounce sell order came into the market and pushed the price down but around US$10 an oz. To put the four-million-ounce sale in perspective, Australia’s biggest gold miner Newcrest Mining (ASX: NCM) produced just 2.4 million ounces in FY17. Looked at another way, at the current gold price of AU$1,665, the value of a trade that size is around AU$6.6bn. Large trades like this have become almost a regular occurrence in the gold market with several such trades occurring over the last few months. The direction isn’t always down, however, as some such trades have been buys that have pushed the price higher.

The Reserve Bank of Australia released its monetary policy statement on Friday although there was nothing particularly surprising in it. The bank’s forecasts are for inflation to pick up to 2.25% by December 2019 and for the unemployment rate to edge down to 5.25% from 5.5% currently.

Although the WTI oil price has fallen from its recent highs, it has managed to hold on to most of the gains achieved over recent weeks, currently trading at around US$56.74 per barrel. Increased geopolitical risk in the middle east appears to be helping support the price despite the fact that US production has fully recovered from the recent hurricanes and is back at new highs. On the other hand, unusually cold weather in the north-eastern United States is expected to increase natural gas prices as demand increases. Natural gas futures prices are at a five-month high of US$3.21.

Coming up this week, on Thursday Australia will release its employment data while the US releases CPI and retail sales data. Australia’s employment situation has been much better than expected this year with the employment change beating expectations in almost every month. Despite this, wage growth continues to be weak.

Data Releases:

–    No Significant Data

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This article was written by William O’Loughlin – Investment Analyst, Rivkin Securities Pty Ltd. Enquiries can be made via william.oloughlin@rivkin.com.au or by phoning +612 8302 3633.