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Gold Price Not Following the Consensus

The U.S. Comex gold futures rallied in seven consecutive days, rising 2.95% this week and 8.13% year-to-date. The gold futures have remained above $1,300 during Asia’s Friday morning after breaching this level on Thursday. The Dollar Index declined 0.46% week-to-date and has rallied 0.35% this year. The S&P 500 Index and the Euro Stoxx 50 Index have risen 1.89% and 1.96% respectively this week after a positive week last week.

Weaker U.S. Data Drove Up Gold Sentiment
The January U.S. retail sales declined 0.4% versus an expectation of no change while the jobless claims jumped to 339,000 versus an expectation of 330,000. Both the cold weather and the expiration of the jobless benefits were to blame for the weaker numbers according to Bloomberg. Nevertheless, the world stocks have shrugged off the bad news and went up 1.95% this week while the gold prices also rallied 2.95%. While the media have conveniently attributed the fall in the gold prices to surging U.S. stocks, the daily correlation between the gold futures and the U.S. stock prices in the past two years is actually a positive 0.17 while that between the gold futures and the Dollar Index is a minus 0.405.

Consensus not Always Right
Even though the sell-side analysts’ sentiments on gold prices continue to be bearish for this year, the gold futures have beaten major financial assets since the Fed has started to taper on 19 December, 2013. Cheap valuation and positioning have driven the prices up by 8.92% since then. In fact, the U.S. SPDR gold trust holdings have climbed five metric tons year-to-date to 806.35 metric tons.

What to Watch
Next week, we will watch the Q4 preliminary GDP of Japan on 16 February, the U.S. January housing starts, and the U.S. January FOMC minutes on 19 February as well as the February flash manufacturing PMI from China, E18 and the U.S. on 20 February.

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14 Feb 2014 | Categories: Gold

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