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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold “Buying Opportunity”, Analysts More Bullish On Central Bank Demand

Commodities / Gold and Silver 2012 Apr 27, 2012 - 06:54 AM GMT

By: GoldCore

Commodities

Gold’s London AM fix this morning was USD 1,654.00, EUR 1,250.28, and GBP 1,019.60 per ounce. Yesterday's AM fix was USD 1,648.25, EUR 1,246.22 and GBP 1,017.88 per ounce.

Silver is trading at $30.16/oz, €23.65/oz and £19.29/oz. Platinum is trading at $1,576.25/oz, palladium at $658.75/oz and rhodium at $1,350/oz.


Gold rose $13.80.60 or 0.84% in New York yesterday and closed at $1,657.60/oz. Gold traded initially sideways in Asia then it dipped downward and recovered in early European trading.

Cross Currency Table – (Bloomberg)

Support for gold is at $1,624/oz and $1,612/oz and resistance is at $1,663/oz and $1,684/oz.

Gold is some 1% higher on the week in USD and EUR and the higher weekly close would aid the poor short term technical picture.

Gold consolidated on the gains seen yesterday as the downgrading of Spain's credit rating added fuel to concerns about the debt stricken euro zone. Spain and Italy’s debt servicing costs rose again this morning and the Spanish 10 year touched 6% again.

Gold’s gains may have been tempered by a stronger dollar after the latest easing move by the Bank of Japan. The BOJ expanded the size of its fund for asset buying by 10 trillion yen to 40 trillion yen.

The BOJ may also extend the duration of government bonds it buys to about three years.

The move saw the yen fall overnight but it has since recovered and is the strongest currency so far today.

While periods of strength can be expected the long term outlook for the yen is poor.

The BOJ looks set to continue debasing the yen for the foreseeable future which will result in the yen falling against gold in the long term. The yen has already fallen by nearly 11% against gold year to date (see chart below).

Gold YTD in USD-White, GBP-Orange, JPY-Pink and EUR-Yellow - (Bloomberg)

Bullion hit a 2 week high at $1,660.60 yesterday despite somewhat better US housing data and the Fed’s somewhat brighter economic outlook.

The Fed’s promise to use more QE should the economy falter is supporting gold.

The global economic picture remains grim, with euro zone economic sentiment falling more than expected in April and the US job market recovery showing signs of a slowdown.

Apple earnings and the tech boom and indeed possible tech bubble remains one of the primary drivers of continuing irrational exuberance and risk appetite.

The poor and deteriorating economic backdrop is gold supportive.

Gold Analysts More Bullish As Debt Crisis Not Over – “Buying Opportunity”
Gold analysts are more bullish after central banks expanded their bullion reserves and hedge funds increased bets on a rally for the first time in three weeks.

14 out of 28 analysts surveyed by Bloomberg expect prices to rise next week and 9 were neutral, the highest proportion in 2 weeks.

Central bank demand and CFTC data is one of the reasons for their positivity on gold.

Mexico, Russia, Argentina and Turkey were some of the many central banks that added over 51.8 metric tons valued at $2.8 billion to reserves in March, IMF data show.

Fund managers raised their long positions by 2.5% in the week ended April 17, according to the CFTC.

Ultra-loose monetary policies of recent years and the problems in the euro zone don’t look like they’re going to end any time soon.

The Fed bought $2.3 trillion of debt in two rounds of QE ending in June 2011. We and other analysts believe that it is only a matter of time before the US embarks on QE3.

The UK saw its first double- dip recession since the 1970s, data showed April 25th, while the IMF predicts the 17-nation euro region will contract.

Gold in USD 1 Week – (Bloomberg)

This week is a fresh reminder of the global nature of the crisis with concerns about the UK, US and Japan remerging alongside Spain, euro and Eurozone concerns.

Gold below its 200 day moving average remains a buying opportunity – especially for people exposed by not having any allocation to bullion whatsoever.

For the latest news and commentary on financial markets and gold please follow us on Twitter.

GOLDNOMICS - CASH OR GOLD BULLION?



'GoldNomics' can be viewed by clicking on the image above or on our YouTube channel:
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This update can be found on the GoldCore blog here.

Yours sincerely,
Mark O'Byrne
Exective Director

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