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Shifting the Attention from Gold to Equities

The U.S. Comex gold futures rose on Thursday by 0.71 percent to $1,392.50. Week-to-Thursday, the gold futures are down 7.25 percent while year-to-date, the prices are down 16.91 percent. Gold has returned 17 percent per year in the previous ten years. However, the gold futures entered into a bear market on 12 April as the big sell-off began. The S&P 500 index fell 2.09 percent in the past two days while the Euro Stoxx 50 index also dropped 2.06 percent. The Dollar Index rose 0.30 percent this week with the Euro/Dollar dropping 0.47 percent and the Yen rising 0.20 percent against the Dollar. The CRB Commodity index suffered a loss of 1.50 percent this week.

Stocks Declined as Gold Rebounded
Market’s concerns have shifted to equities after the gold’s downturn. Bloomberg highlighted that the U.S. stocks peaked in April in the past three years and declined for the next two to six months. The sentiment towards stocks and commodities has been weak as economic data from the U.S. and China were weaker than expected while some earnings results were disappointing. The U.S. leading indicators index, a gauge for the economy in the next three to six months, dropped 0.1 percent in March compared to an expected increase of 0.1 percent. The expansion at both the Philadelphia and the New York regions cooled in April with inventories plunging.

Debates on Gold
After the gold price plunge, the Chinese, Indian and Thai retail buyers rushed to buy gold. The April U.S. Mint sales more than doubled from March to April while the Australia’s Perth Mint saw its sales doubled in one week. Central banks are watching closely the price level to re-enter even though some bank analysts are calling for gold prices to go towards $1,000. The gold-backed ETP holdings declined by 2.41 percent this week to 2,348 metric tons and dropped 10.8 percent this year. A stronger dollar remains a danger for gold.

What to Watch
The important events and data to watch next week will include the April “Flash” manufacturing PMI from China, the E17 and the U.S. on 23 April, the April Germany IFO business climate index and the March U.S. durable goods orders on 24 April, and the Bank of Japan policy rate meeting on 26 April.

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19 Apr 2013 | Categories: Gold

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