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Gold Looks Oversold Compared to Stocks

The U.S. Comex gold futures inched up 0.5 percent to around $1,245 on Thursday despite thin trading volume on the Thanksgiving Day in the U.S. The gold futures have erased losses for the week while the Dollar Index has dropped 0.18 percent this week. The S&P 500 Index climbed to a record high on Wednesday and was up 0.17 percent for the week. The Euro Stoxx 50 Index rose 1.21 percent week-to-Thursday. 

Euro Area and U.S. Economic Data Cheered Stocks
The November Euro Area economic confidence index increased nine months in a row to 98.2 compared to an expected 98.0. S&P has also raised the outlook of Spain’s external debt from negative to stable as Spain exited from recession in Q3. In the U.S., the latest initial jobless claims fell 14,000 more than expected while the October leading indicators rose 0.2 percent on the month compared to an expectation of no change. Year-to-date, the S&P 500 index rose 29 percent, the Euro Stoxx 50 Index jumped almost 22 percent, and the Nikkei Index surged over 50 percent, dramatically outperformed the gold futures, which dropped 26 percent. Investors may have become complacent with stocks versus gold as the VIX index fell below 13. 

Chinese Appetite for Gold
Physical demand has been given a boost as Hong Kong reported that China has net imported from Hong Kong 131.19 tonnes of gold in October, the second highest level in history. China has imported more than 100 tonnes of gold each month in the last six months. As the Chinese gold demand will continue to pick up before the lunar New Year at the end of January 2014, China will likely overtake India as the largest consumer in the world in 2013. 

What to Watch
We will monitor the final November PMI from China, E17, U.K. as well as the U.S. on 2 December, the Fed Beige Book release on 4 December, the U.S. initial jobless claims and the U.K. and the ECB monetary policy decisions on 5 December as well as the November U.S. non-farm payrolls, the unemployment rate, and the October core PCE price index.

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29 Nov 2013 | Categories: Gold

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