Gold Price Surged When Bonds and Stocks Risks Increased
The U.S. Comex gold futures prices surged 2.36 percent in the past two days to
end at $1,411.50 on Thursday. During Asian Friday morning, the prices
jumped another 0.40 percent to $1,417. In contrast, the Dollar Index
has had a setback, dropping 1.26 percent on Wednesday and Thursday to
finish at 83.042. The S&P 500 index and the Euro Stoxx 50 index
rebounded 0.37 percent and 0.45 percent respectively on Thursday after
falling the day before. The Nikkei 225 index entered into a correction
on Thursday when it dropped 5.15 percent. The market plunged after the
10-year JGB yield reached 0.933 percent from 0.609 percent at the end of
April.
Did the Market Read the Fed Wrongly?
The recent data from the U.S. have given hope to the market that the Fed
would not slow down its bond purchases anytime soon. The U.S. real GDP
grew at 2.4 percent in Q1 versus an expected 2.5 percent while the
jobless claims rose to 354,000 versus the forecast of 340,000. The
April pending home sales rose only 0.3 percent versus the survey of 1.5
percent. The economy does not appear to be improving on a sustainable
basis, and the Fed will likely maintain its debt purchases. In Japan,
the industrial production surged 1.7 percent in April although the CPI
fell again. The better growth data helped the stock market to rebound
on Friday.
Asian Love for Gold
In its press release on Thursday, the World Gold Council highlighted the
divergence in behaviour between the buyers of gold bars, coins and
jewellery and the buyers of the ETF products. The WGC survey found that
82% of the buyers in India and China see a stable or higher gold price
in the next 5 years. Gold demand in Asia will also reach a record high
in Q2 2013 according to the WGC.
What to Watch
We will watch Ben Bernanke’s speech on 2 June, Janet Yellen’s speech and
the May final PMI index for China, the E17 and the U.S. on 3 June, the
10-year JGB auction on 4 June, the U.S. Fed Beige Book and the U.S. May
ADP private payrolls on 5 June, the monetary policy announcement of the
BoE and the ECB on 6 June as well as the April Germany industrial
production data and the May U.S. non-farm payrolls and unemployment rate
on 7 June.
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31 May 2013 | Categories: Gold
