By Sharps Pixley Ltd
Wed 18 Apr 2012 05:05:50 CT
After briefly breaching $1,680 on 12 April last week, gold futures ended
the week at $1,660, up 1.85% for the week. On Monday, gold futures
fell 0.6% while the dollar index also fell 0.4%. Gold stabilized by
Tuesday, now trading at around $1,651 as Asian markets open on
Wednesday. On Tuesday, after both the S&P and the Stoxx had their
worst week since mid-December, S&P rose the most at 1.55% since
mid-March and the Stoxx had the largest one-day climb at 2.86% since end
Macroeconomic performance and projections help to whipsaw gold prices
while cut in speculative positions in commodities also impact gold.
Growth slowdown in China and fear on Spanish debt auction spilled over
from risky assets to gold. China's Q1 GDP growth slowed to 8.1%, the
lowest in 3 years, while foreign direct investment into the mainland
sank for the fifth month. The Spanish 10-year government bond exceeded
6% on Monday though it rallied 18bp on Tuesday after the amount of
T-bills sold exceeded the maximum target, easing investors' concern in
The IMF upgraded the world economic growth in 2012 from 3.3% to 3.5% and
the U.S. economic growth from 1.8% to 2.1% while maintained China's
growth at above 8%, suggesting that the U.S. and the Asian countries can
grow fast enough to offset the European recession. India also
surprised the market by cutting interest rate by 50bp on Tuesday which
will help growth and investment demand including gold.
For the week ending April 10, CFTC reported that fund managers reduced
by 9.3% their net positions across the 18 commodities futures and
options, the largest decline since 20 December. EPFR Global also
reported that commodities mutual funds, especially in gold and other
precious metals, saw the largest weekly outflow since early January.
However, physically-backed ETPs remain resilient at 2,442 tonnes, just 3
tonnes lower than the peak in mid-March.
Barclays pointed out that while a base for gold may be forming around
$1,600, helped by the resilient ETP demand and gradually-rebounding
physical demand, for gold to go decisively higher, it needs to
reestablish its safe haven appeal in the short-term.
Speeches by the IMF Managing Director and the World Bank President on
the world economy end of this week will likely be closely watched by
Sharps Pixley, Londonwww.sharpspixley.com
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*Disclaimer: The information in the Market Commentaries was obtained from sources believed to be reliable, but we do not guarantee its accuracy. Neither the information nor any opinion expressed therein constitutes a solicitation of the purchase or sale of any futures or options contracts.