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A Well-Balanced Gold Market in Q1

The U.S. Comex gold futures jumped 3.05% week-to-Thursday compared to 0.30% for the S&P 500 Index, -0.89% for the Euro Stoxx 50 Index, and -1.41% for the Dollar Index. The gold futures retreated to $1,220 level during Asia Friday morning from the Thursday close at $1,225.20. The U.S. ten-year government bond yield dropped from a recent high of 2.2926% on Wednesday to 2.2301% on Thursday while the ten-year German Bund yield fell from 0.724% on Wednesday to 0.702% on Thursday. The crude oil futures fell almost 1.5% in the past two days and ended at $59.88 on Thursday.

Weaker Dollar as U.S. Growth Loses Some Momentum
Although the U.S. unemployment insurance applications fell 1,000 in the week ending 9 May and brought the latest monthly average to the lowest level since April 2000, the April wholesale prices fell 1.3% and the Bloomberg Consumer Comfort Index fell for the past five weeks. This has prompted some economists to lower the U.S. Q2 real GDP growth forecast. The rising Euro Dollar after Greece has repaid its debt to the IMF also supports gold prices.

Gold Demand Trends
According to the latest gold demand trends report from the World Gold Council, global gold demand fell 11 tonnes or one percent to 1,079.3 tonnes in Q1 2015. Net central bank purchases and positive inflows from the investors balanced out falling jewellery demand in China and Turkey. The decline in China demand was attributable to GDP slowdown and rallying stock markets while the lower demand in Turkey was due to falling currencies and higher local gold prices.

What to Watch
We will monitor the Chicago Fed President’s speeches on 18 May and 20 May. We will also watch the preliminary Japan Q1 real GDP on 19 May, the May U.K. MPC minutes, and the U.S. FOMC minutes on 20 May, the May China flash HSBC manufacturing PMI index and the Eurozone “flash” manufacturing PMI index on 21 May as well as the May Germany IFO business climate index, the April U.S. CPI, and the U.S. May “flash” manufacturing PMI index on 22 May.

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15 May 2015 | Categories: Gold

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