Gold Price Rose While Europe Shook - Sharps Pixley
The U.S. Comex gold futures rebounded 0.85 percent last week after a
1.80 percent drop the week before. The gold futures inched up 0.17
percent this week to $1,673.50 on Tuesday and were down $2 since the end
of last year. After rising for five consecutive weeks, the S&P 500
index is taking a breather this week, dropping 0.12 percent. The
S&P has risen almost 6 percent this year - the clear winner among
riskier assets. The Euro Stoxx 50 index has been much more volatile,
dropping 2.17 percent this week after falling 1.24 percent last week.
The index has risen only 0.91 percent this year. The Dollar Index has
hardly moved, dropping 0.35 percent year-to-date.
European Tremor
The gold futures climbed 0.60 percent last Friday after the U.S.
reported that 157,000 workers were added in January while the two
previous months’ revisions amounted to a positive 127,000 jobs. The
faster job growth may signal more inflationary pressures, which will
benefit the gold price. The price continued to rise on Monday amidst
renewed political concerns in Europe. The Spanish 10-year government
bond yield surged about 43bp from its recent low to 5.438 percent on
Monday as the market became fearful of a new election. The Italian
10-year government bond yield also rose about 34bp from its recent low.
The rising popularity of the Italian Berlusconi in the election
campaign and his controversial tax measures could derail the
government’s austere fiscal effort.
Supportive Chinese News
China has just released 35 measures to tackle its income distribution
problem. These measures aim to reduce poverty, correct income
inequality, raise social spending, and increase the proportion of
household income in the overall GDP. According to official data,
China’s per capita disposable income rose around 13 percent in 2012.
Rising income and a bigger middle class should raise the demand for
gold. Economic growth in China last year has boosted gold imports into
China from Hong Kong by 94 percent to 845.5 metric tons. Local analysts
continue to expect the economy to recover while the central bank will
purchase more gold.
India’s Central Bank to Curb Gold Import
In the meantime, Reuters reported that the Indian central bank will
likely reduce India’s gold import demand by chanelling the 20,000 tonnes
of gold held by households into the banking system using new
gold-linked products. However, the new measures will take time to show
their impact. If inflation continues to stay high in India, gold demand
is unlikely to drop tremendously.
Kelly Smith
Sharps Pixley, London
www.sharpspixley.com
06 Feb 2013 | Categories: Gold
