UNITED STATES August 11 2014 9:00 AM
NEW YORK (Scrap Register): US 10 year Treasuries have fallen and gold prices have rallied back above $1300 an ounce, drawing a safe haven bid following concerns over military action escalating in Ukraine, fears Russia may widen its ban on agricultural imports, and President Obama’s authorisation of airstrikes in Iraq.
Weaker equity markets and rising fears have overshadowed the better-than-expected data from the US and the stronger dollar, providing a short-term boost to gold prices.
In turn, tactical investors have increased their exposure to gold, but in Barclays’ view, the recent uptick in prices is likely to be short lived, given broad investor interest has failed to follow through and physical demand is showing little sign of recovering significantly in the near term.
Barclays’ economists expect the forthcoming Jackson Hole summit (21-23August) to become the focus for markets seeking fresh signals from central bankers. The views expressed at the meetings on this year’s theme, ‘Re-evaluating Labor Market Dynamics’, will likely be viewed as a gauge of how eager central banks may be to normalise policies in coming quarters. Our economists continue to expect the committee to raise the federal funds rate beginning in June 2015.
In Barclays’ view, gold lacks broad investor support, as ETP holdings are down 46 tons for the year to date and are mostly flat so far in H2 14.Gold held in trust is down 6.3 tons for the month thus far, with the rising geopolitical tensions sparking little interest among ETP holders.