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Gold Price Surged on President Obama’s Re-election; Markets Look to Fiscal Cliff Solution and Greek’s Votes

The U.S. Comex gold futures dropped $40 last Friday and ended at $1,675.20; the last time gold ended below $1,700 was on 5 September. The gold futures rebounded 2.38 percent on Monday and Tuesday and in the early afternoon of Asian trading, gold futures rose further to $1,724.30, prompted by the re-election of the U.S. President Barack Obama. After rising 0.16 percent and 2.05 percent respectively last week, the S&P 500 Index surged 1 percent while the Euro Stoxx 50 Index retreated 0.44 percent. The Dollar Index rose 0.66 percent last week and is now trading weaker during Wednesday morning in Asia at around 80.3.

Gold futures plunged below $1,700 last Friday when the U.S. October non-farm payrolls rose by 171,000 compared to the expected 125,000 and the rise of 148,000 in September. Gold traders were concerned that QE3 may end sooner than expected should the labour market continue to recover strongly. Also a Romney presidential win may boost dollar and lead to a more hawkish monetary policy.

There are signs that physical demand for gold has been improving. In September, Chinese gold imports from Hong Kong rose 23 percent year-on-year and rose 30 percent from August. Year-to-date to September, gold imports into China from Hong Kong rose from 203,646 kg in the same period last year to 581,848 kg, suggesting investors and institutions have upped the demand for gold in their asset allocation. The Indian consumers are expected to scoop up gold on Dhanteras on 11 November, an auspicious day to buy gold. On the trading side, the CFTC non-commercial net positions in gold have dropped in three consecutive weeks, reflecting a cleaner positioning in gold according to Barclays.

Now that the Americans have decided on Obama, gold price is expected to rise further on expectations of more economic stimulus. However, market attention will also turn to the uncertainties caused by the U.S. fiscal cliff totalling more than $600 billion beginning 2013 and the outcome of the Greek’s vote on the austerity measures on Wednesday.

Austin Kiddle
Sharps Pixley, London

07 Nov 2012 | Categories: Gold

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