Overall, it was a decent week for gold. It was a swing for gold that swayed between the bullish and bearish trends. Since Nov. 7, the metal has climbed 9 percent from a four-year low.
Gold was up 2.5 percent this week after Tuesday’s big rally. Falling stock markets have prompted some investors to buy the metal as an alternative asset, while a drop in the greenback made dollar-priced bullion cheaper for holders of other currencies. The spot gold price was last at $1,224.00/1,224.90 per ounce, down $1.80 on Thursday’s close. But overall it was a positive week for gold.
Some key influential factors for gold this week have been:
SPDR: An improvement in sentiment was seen in the holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund. Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, edged higher to 725.75 tons on Friday, a nearly 5 tonnes rise last week. Since mid November its around 717 to 721 tonne range in terms of holdings.
Gold soon touch a low on Friday to print a price of $1214 when the US consumer confidence spiked to a new post-recession high in December. The Thomson-Reuters/University of Michigan preliminary index of consumer sentiment leapt to 93.8 then the expected value of 89.5, the highest level in the past 8 years. This confidence could be attributed to the decline in fuel prices.
CHINA: China’s National Bureau of Statistics report showed that industrial production to have advanced 7.2 percent in November from last year. This was the weakest growth in three months and slower than the 7.7 percent increase seen in October and 7.5 percent growth forecast by economists, which will only fuel speculation that further stimulus measures from Beijing might be needed.
EURO ZONE: data from Eurostat showed Eurozone industrial output to have edged up by a less than expected 0.1 percent October, after a revised 0.5 percent increase in the preceding month. Moreover, Fitch ratings cut its ratings on France to AA from AA+ on Friday, saying the country’s revised deficit reduction target was not enough to avoid a downgrade.
DOLLAR: Gold extended gains as the dollar headed for the biggest drop in a month against a basket of 10 currencies. The dollar index, which tracks the U.S. unit against six major currencies, traded at 88.32 on Friday, down from its previous close of 88.55 late Thursday in North American trade.
OIL PRICES: Weakness in energy prices have weighed on gold sentiment lately, dulling the metal’s appeal as a hedge against oil-led inflation.
Overall, Safe-haven demand and short covering have been behind gold’s recovery from 4-1/2-year lows hit last month.
Silver does remain locked in the range of $17.00 – $17.35 with a break either side of this, would give some more idea on which side is the prices headed. Whereas the short term support for Gold is at USD $1215 and the resistance around $1235
With the FOMC meeting next week, and amid increased market concerns over Russia, Greece, global energy prices, Chinese economic growth etc. both gold and silver are likely to remain range bound and dominated by technical trading patterns.
Markets believe that the statement released by the FOMC all this while about “considerable time” shall be removed from their minutes now. Which means that the rate hike will happen soon which will further affect gold prices.
What needs to be watched closely this week?
- 15th – the U.S. November industrial production
- 16th – the December flash manufacturing PMI for China, the Eurozone, and the U.S. November housing starts
- 17th – the Bank of England MPC Minutes, the FOMC rate decision, the Fed’s press conference and the U.S. November inflation
- 18th – Germany’s December IFO business climate
- 19th – the Chicago Fed’s speech
As we approach 2015 while bidding farewell to 2014, we see three major events that will be affecting gold prices largely in the coming year:
- FED’s move towards normalizing monetary policy and raising interest rates
- Problems in the Eurozone and the European Central Bank’s stimulus plans
- China consumption and growth story