Gold’s New Factor: ECB’s QE?
The U.S. Comex gold futures rebounded from a recent trough of $1,268.40
on 24 April to end at $1,290.60 on Thursday, down 0.26% for the week.
During Friday Asia morning, the gold futures rose a further 0.12%. The
Dollar Index ended below 79.80 on Thursday and was flat for the week.
The S&P 500 Index was up 0.75% for the week after rising 0.74% the
week earlier while the Euro Stoxx 50 Index was up 1.10% after climbing
1.08% last week. The U.S. ten-year government bond yield rallied 4bp to
2.68% this week.
Gold Finding Temporary Support
With Russia stepping up its military exercises on the Ukrainian-Russian
border, the U.S. is preparing for further sanctions on Russia which
could include strategic companies such as Gazprom and the Russian banks.
Gold rebounded from the $1,268 level on Thursday as the Ukrainian
crisis escalated while the volume in the Shanghai Gold Exchange reached a
two-month high on Wednesday.
ECB Debating on QE and Global Growth Outlook
With the European inflation rate running at 0.5% in March, much below
the two percent target, the Eurozone Q4 GDP growth at only 0.2%
annualized, and the Euro/Dollar up almost seven percent in the last
year, the ECB is considering directly buying long-term securities which
are backed by mortgages and auto loans, bank debt, corporate debt, and
government bonds in the 18 countries. While the Euro may decline
against the dollar, a step-up in actual inflation could lead to more
demand for gold, which is a store of value. The March U.S. new home
sales and the April flash manufacturing PMI were worse than expected
although April’s PMI at 55.4 was only 0.1 point lower than that in
March. The Eurozone April flash manufacturing PMI was higher than
expected at 53.3 while Germany’s April IFO Business Climate Index jumped
to 111.2 from 110.7 in March.
What to Watch
We will monitor the UK Q1 preliminary GDP, the U.S. February 20-city
housing prices level, and Japan’s March industrial production on 29
April, the U.S. FOMC meeting and the U.S. preliminary Q1 GDP on 30
April, Fed Chairman Yellen’s speech, China’s April NBS manufacturing PMI
Index, the U.S. March Core PCE Price index, and the U.S. April ISM
manufacturing index on 1 May as well as the Eurozone April manufacturing
PMI, the Eurozone March unemployment rate, and the April U.S. non-farm
payrolls and unemployment rate on 2 May.
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25 Apr 2014 | Categories: Gold