Best of the Week
Most Popular
1.Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - Nadeem_Walayat
2.Gold And Silver – A Reality Check - Michael_Noonan
3.The Killer Ape, Human Evolution, Artificial Intelligence and Extinction End Game - Nadeem_Walayat
4.Stock Market S&P 500 Volatility-Based Price Probability Range - Richard_Shaw
5.A Stocks Bear Market Is Now More Likely Than Not - Richard_Shaw
6.Money Supply and the Fed’s Serious Inflation Risks - Zeal_LLC
7.More Selling for Stock Market, Gold? - Brad_Gudgeon
8.Gold, Silver Precious Metals: a Critical Week Ahead - Rambus_Chartology
9.Gold Price Change in Character - Gary_Savage
10.Advice for Biotech Investors: 'Hold Your Powder' 'til Winter - TLSReport
Last 5 days
Financial Markets Calm Before the Storm? - 9th Oct 15
Stock Market History Calling, Says Performance will be Crappy for Another ~10 years! - 9th Oct 15
Why This Feels Like an Economic Depression for Most People - 9th Oct 15
Dr Copper Back from the Dead - Time to Buy or Blink - 8th Oct 15
Glencore Rout Blamed on Short Sellers Playing With CDS - 8th Oct 15
The Real Reason for the Refugee Crisis You Won’t Hear About in the Media - 8th Oct 15
US Stocks: The [Trend]Line Between Bull and Bear Market - 8th Oct 15
Bundesbank “Reassures” Re. Gold Bullion Reserves as Deutsche Bank Shocks With €6 Billion Loss Warning - 8th Oct 15
How Our Aversion To Change Leads Us Into Danger - 8th Oct 15
Moving Stem Cell Research Forward: Bernie Siegel of the Genetics Policy Institute - 8th Oct 15
Stock Market VERY IMPORTANT Turn Date - 7th Oct 15
The 5th Convergence…An Economic & Financial Superstorm That Will Devastate America - 7th Oct 15
Summers Grades Janet Yellen's Fed Performance 'Incomplete' - 7th Oct 15
Gold Versus Central Banks Paper Ponzi - 7th Oct 15
QE3 is Over Get Ready for QE4 - 7th Oct 15
How to Profit from Government Mandates in Biofuels - 7th Oct 15
A Key Oil Price Trend That Everyone Is Missing - 6th Oct 15
Stock Market Turn Appears to Have Been Made - 6th Oct 15
Designing a Dividend Growth Portfolio for a Specific Retirement Yield Objective - 6th Oct 15
Peter Schiff Predicts Gold Price Breakout - Video - 6th Oct 15
Theresa May Declares War on Immigration - Conference Speech Full Transcript - 6th Oct 15
Is Russia Plotting To Bring Down OPEC? - 6th Oct 15
Target Date Funds As Aid In Retirement Investment Portfolio Design - 6th Oct 15
Stocks Bear Market Apocalypse Imminent Crash Gets Nuked Again - 6th Oct 15
Redesigning Internet and Facebook to Explore Their Full Potentialities... - 5th Oct 15
Nightshades Curb Your Enthusiasm - 5th Oct 15
U.S. Recession Watch, High-Yield – Rising Defaults - 5th Oct 15
The Social Challenge to Find Humanity in Capitalism - 5th Oct 15
Fed Interest Rate Hike: "I don't care. It doesn't really make much of a difference" - 5th Oct 15
Gold Rose 2.2%, Silver Surged 5.4% After Poor Jobs Number On Friday - 5th Oct 15
Gold, Silver Precious Metals: a Critical Week Ahead - 5th Oct 15
Stock Market Correction Still in Force - 5th Oct 15
Gold Price Change in Character - 5th Oct 15
Putin’s Blitz Leaves Washington Rankled and Confused - 4th Oct 15
More Selling for Stock Market, Gold? - 4th Oct 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Gold Escapes Bearish Channel and Heads for Weekly Gain

Commodities / Gold and Silver 2012 Apr 13, 2012 - 12:36 PM GMT

By: Ben_Traynor


Best Financial Markets Analysis ArticleU.S. DOLLAR prices to buy gold traded sideways just below $1680 an ounce during Friday morning's London session – back up at levels last seen ten days ago – while stock markets and industrial commodity prices edged lower and government bonds gained.

A day earlier, gold prices jumped 1.6% during US trading – holding onto most of those gains during Friday's Asian session despite the release of lower-than-expected Chinese growth figures.

"We have now closed well above the short-term bear channel," reckon technical analysts at bullion bank Scotia Mocatta.

"The previous resistance level at $1656 should provide some support," they add, citing current resistance at $1680.

"[Gold] options activity this week suggests something is brewing," adds a note from investment bank UBS.

"There has been a good deal of interest in upside options, particularly for $1800 June calls, with gold's safe haven performance on Tuesday the likely catalyst."

Tuesday saw gold prices gain while stock markets fell.

Heading into the weekend, the cost to buy gold in Dollars was heading for a 2.2% weekly gain by Friday lunchtime in London.

Prices to buy gold in Euros were up 1.8% on the week at around €40,900 per kilo (€1270 per ounce), while Sterling gold prices were up nearly 2% at around £1050 per ounce).

Silver prices meantime held steady just below $32.50 per ounce during Friday morning's London trading – heading for a 1.6% weekly gain after posting gains in Thursday's US session.

CME Group, which operates the New York Comex futures and options exchange, has said it will cut its margins on silver futures for the second time since February.

China – the world's second largest source of private gold bullion demand last year – saw its economy grow at its slowest rate in nearly three years during the first quarter of 2012, according to official data published Friday.

Gross domestic product grew 8.1% in Q1 compared to the same period last year, lower than most forecasts. And down from 8.9% growth in the final quarter of 2011.

"What's clear is that the economy is still decelerating and the property sector clearly is deflating," says Yao Wei, Hong Kong-based China economist at Societe Generale.

"It seems that property investment has finally started to correct. I think this trend will continue and will drag growth even lower in coming months so we don't think this is the bottom yet. It means more monetary easing will be needed to prevent a sharper deceleration."

China's central bank has cut reserve requirement ratios – the amount banks need to hold in reserve as a proportion of their assets – twice in the last six months. New loans last month were over 1 trillion Yuan, their highest level for a year. 

Here in the UK, so-called 'factory gate' inflation – the price of outputs as measured by the producer price index – fell to 3.6% last month, down from 4.1% a month earlier.

Over in Europe meantime, German consumer price inflation was 2.1% in March – compared to February's 2.3%.

The European Central Bank is more likely to resume buying government bonds on the open market through its Securities Markets Programme than hold a third three year longer term refinancing operation (LTRO), according to a survey by newswire Bloomberg.

"Market stresses will eventually force the ECB to restart the bond program, but it's not imminent," reckons Ken Wattret, chief Euro are economist at BNP Paribas in London.

European banks borrowed over €1 trillion in total at the LTROs held in December and February.

Banks in Spain – which last month borrowed a record €316.3 billion from the ECB through its other liquidity channels, double February's figure – are thought to have used a lot of this funding to buy Spanish government bonds.

Benchmark yields on Spanish 10-Year bonds dropped from over 6.5% last November to less than 5% earlier this year following the announcement of the LTROs – though they have since risen again and are currently just below 6%.

"There is mounting evidence that the LTRO is pretty toxic for banks and isn't working,” says James Nixon, a former ECB official now chief European economist at Societe Generale in London.
"I don't think there will be another one."

"Something is wrong when you load up on assets that were considered risky in November and deemed un-risky in January," adds Royal Bank of Scotland chief European economist Jacques Cailloux.

"Now we're seeing the worst you could have hoped for. As soon as the situation of the sovereign worsens, banks will come under additional market pressure. That's extremely negative."

"Given the return of the debt worries," says a note from Swiss bullion refiners MKS, "gold will likely remain underpinned in the coming sessions. Nevertheless, one should keep in mind that the metal still remains capped by its overhead trend line resistance of $1680."

"But in order to capitalize on Europe's renewed woes," adds UBS, "gold needs to start behaving as a safe haven again. A one-day performance is not enough."

By Ben Traynor

Gold price chart, no delay   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK's longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History