Policy-Dependent Gold Prices
The U.S. Comex gold futures rallied 0.74 percent on Thursday but erased their gains on Wednesday, ending at $1,308.50. The Dollar Index jumped 0.45 percent to 80.845 on Thursday, rising 0.16 percent week-to-date. The S&P 500 index was down 0.82 percent while the Euro Stoxx 50 Index was up 0.33 percent in the past two days. The S&P 500 plunged 1.32 percent while the Euro Stoxx 50 Index dropped 0.44 percent on Thursday.
Back to Stimulus Bets
The Q3 U.S.
GDP climbed 2.8 percent annualized versus an expected 2.0 percent while
the latest weekly jobless claims declined by 9,000 to 336,000. The
stronger U.S. data caused both the stocks and gold prices to fall as the
market became worried that the Fed will taper sooner than expected
(March 2014). Indeed, a recent study by SLJ Macro Partners found that
the Fed policy explains 40 percent of the equity price changes. The
stronger U.S. growth data overshadowed the cut in interest rate of 0.25
percent by the ECB in order to combat a low inflation rate of 0.70
percent in October. The ECB is likely to continue its accommodative
monetary policy as the Euro-economies remain fragile. In China, exports
rose 5.6 percent year-on-year in October compared to a median forecast
of 1.7 percent, leading to the biggest monthly trade surplus of $31.1
billion for this year and likely reflecting the U.S. recovery.
Central Bank Gold Actions
A
study by Precious Metals Insights revealed that China has likely added
300 metric tons of gold in the first six months of 2013 against a global
gold production of about 2,700 tonnes. The Chinese demand has helped
to support gold prices this year when the price reached a 34-month low
in June. While China added gold, Russia has reduced gold in September,
and Mexico has continued to cut holdings. The central banks are
expected to add 350 tons of gold in 2013 versus 534.6 tons in 2012.
What to Watch
Starting
9 November, the Chinese Communist Party will meet for four days
discussing further economic reforms. We will also watch the October
U.S. non-farm payrolls and the unemployment rate on 8 November, the
October CPI and industrial production on 9 November, the Eurogroup
meeting on 11 November, the Q3 preliminary Japanese real GDP and the E17
September industrial production on 13 November, the Fed speech on 14
November as well as the E17 Q3 preliminary real GDP and the U.S. October
industrial production on 15 November.
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08 Nov 2013 | Categories: Gold
