Signs of Life Punctures Gold Price Surge For Now
The U.S. Comex gold futures dropped slightly by 0.1 percent in the past
two days and fell 0.85 percent this week, ending at $1,744.70 on
Thursday. While the Dollar Index rebounded on Thursday by 0.44 percent,
it is still down by about 0.38 percent this week. The world stock
markets did well with the S&P 500 Index rising 2 percent, the Euro
Stoxx 50 Index surging 4.26 percent and the emerging markets stocks
jumping 1.67 percent this week.
The enthusiasm for gold has waned a bit given stronger data from the
U.S. and China which may mean policy makers do not need to stimulate the
economy as much. The September housing starts in the U.S. rose 15
percent while an index of U.S. leading indicators jumped 0.6 percent in
September. Still it is highly unlikely for the Fed to change its QE3
decision in the October FOMC meeting. After slowing down for seven
quarters, China’s economy appears to be bottoming out. Q3 real GDP rose
as expected by 7.4 percent year-on-year, industrial production in
September jumped 9.2 percent while retail sales climbed 14.2 percent.
The events at the EU Summit are unnerving gold investors as well - Spain
still has not requested any formal aid and appears to wait until the EU
leaders approve the banking supervision process. The new system, to be
headed by the ECB, is expected to cover all the Euro-area banks
beginning January 1, 2014, a year later than planned. There are no
agreements yet on how large the ECB’s authority should be or how the
banking losses should be shared.
While gold prices are going back and forth due to economic data from the
major economies and political discussions in Europe, the World Gold
Council cited four key reasons why gold price is supportive in the long
term: rising inflation risk, rising economic imbalances because of
distorted low interest rates, weakening trend of major currencies, low
real rates and continuing demand for gold by emerging countries.
The next few important events to watch will be the U.S. September
existing home sales on 19 October, the U.S. Presidential debate on 22
October, the FOMC meeting conclusions, the October Eurozone
manufacturing PMI and the October Chinese flash HSBC manufacturing PMI
on 24 October and the U.S. Q3 GDP data on 26 October.
Austin Kiddle
Sharps Pixley, London
www.SharpsPixley.com
19 Oct 2012 | Categories: Gold
