Gold Prices Lifted by Hopes of Global Stimulus, and Commodities Price Pressure
By Sharps Pixley Ltd
Wed 22 Aug 2012 08:14:43 CT
The U.S. Comex gold futures have risen in five consecutive days, closing
at $1,640.70 at the end of Tuesday. The gold futures surged 1.22
percent this week, and traded at a three-and-a-half months high. The
S&P500 Index traded down 0.35 percent this week, although the level
is approaching April's high of 1,419. The Stoxx 50 Index rallied 0.97
percent this week, the Euro/Dollar Index rose 1.12 percent while the CRB
Commodities Index surged 1.37 percent. The Dollar Index retreated
about 2.49 percent from the recent high reached on 24 July to 81.907 as
The risky external markets, commodities and gold are all having a tear.
The sentiment on commodities has turned positive owing to traders'
expectations of further monetary easing in China, and better U.S. growth
prospects. China's Premier Wen said there would be room for more
monetary operation, while the U.S. consumers' confidence in August and
July's leading indicators both turned out better than expected.
Prices of the European stocks were further boosted by falling borrowing
costs in Spain: the yield of the 12-month bill declined 85bp to 3.07
percent, while the yield of the 18-month bill fell 90bp to 3.34 percent
compared to the level at the last sale. The market will also focus on
Jean-Claude Juncker's visit to Greece on the country's request to extend
the fiscal adjustment program by two years, as well as the
Hollande-Merkel meeting on 23 August. The tone of these meetings will
inform the market what to expect at the ECB meeting and the European
Union Summit in September.
According to Bloomberg, investment holdings in gold have just reached an
all-time high of 2,437.49 tons. Rising investment demand, and central
bankers' appetite for gold, estimated at 500 tons in 2012 by the World
Gold Council, are the major positive factors supporting gold. On top of
that, rising commodities prices will likely boost inflationary
pressures, prompting investors to buy gold as an inflation hedge.
All eyes will be on the Fed's July FOMC minutes to be released on 22
August to see how the doves and the hawks in the Fed are positioned, and
what conditions are needed for QE3.
Sharps Pixley, Londonwww.sharpspixley.com
View All Market Commentary
*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.